The real issue of profit.

[boneyard bill]

There are a number of threads here that deal with profit, but they have been up so long that they are bogged down in narrow issues. So let me re-new the debate by focusing on the role and functionality of profits.

The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.

Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.

"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."

Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?

Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?

Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.

Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone. And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government. So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.

So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.

But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.

This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.

So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.

 

[Wizardry]

In a perfectly competitive market, the profit of a firm is 0, because competitors constantly undercut each other on price to steal each other's customers until doing so would make the business unprofitable. A profit is therefore an indicator of a lack of competition.

Some sources of a lack of competition are good. If you innovate, then you can make a profit for a while until your competitors can copy what you've done. This is why competitive markets encourage constant innovation. But profits from each innovation should be temporary.

Some sources of a lack of competition are there by design. Intellectual property laws are government enforced monopolies. They also allow business strategies like branding to make products from different firms imperfect substitutes of each other.

Some sources of a lack of competition are necessary evils. Utilities are just intrinsically noncompetitive things.

And a lot of sources of a lack of competition are bad. Monopolies, like John D. Rockefeller's Standard Oil, use their market position to drive competitors out of business to preserve their own profits. John D. Rockefeller himself was not a fan of the free market; he preferred "cooperation" that would grind out a steady profit to the competitive free market. "What a blessing it was that the idea of cooperation, with railroads, with telegraph lines, with steel companies, with oil companies, came in a prevailed, to take the place of this chaotic condition in which the virtuous academic Know-Nothings about business were doing what they construed to be God's service in eating each other up." --John Davison Rockefeller: Enemy of the Free Market.

And of course the reason why oil can't stay cheap forever is that the prices of things are set by supply and demand, and people like Henry Ford come along and invent useful machines that run on oil, which causes demand for oil to increase, raising the price of oil. And the supply of oil can't be expanded indefinitely to match because oil is a finite resource and John D. Rockefeller took it out of the ground to be burned. And now that oil is gone forever.

The utility of money decreases the more you have. It's a bigger improvement to go from broke to $1 million than it is to go from $1 to $2 million. So if a firm has made a bunch of profit, it would be more beneficial overall to distribute it to employees or customers, than to the presumably rich owner. Now the owner has the legal and moral right to decide to keep it, but that doesn't change the fact that "keep it" is morally inferior to "help others".

 

[ksen]

Thanks for starting the new thread bill. Hopefully this one won't get bogged down like the other ones but I suspect that the usual suspects will come in with their usual piercing questions to take this thread where all the other ones typically go. Of course there's a remedy for that which is for everyone else to stop taking the bait but taking the bait seems to be prerequisite to posting on a messageboard.

There are a number of threads here that deal with profit, but they have been up so long that they are bogged down in narrow issues. So let me re-new the debate by focusing on the role and functionality of profits.

The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.

Ok so far.

Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.

True, and there were attempts to bring profit into the mix.

"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."

Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?

What do you mean by "coercion?" Are you limiting that word to only coercion by government?

Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?

Are you trying to frame the debate as people on the Left not wanting lower prices if it means more goes to the owners? I would much rather have an economy full of Henry Fords and Arthur T. Demoulas' than Lloyd Blankfeins and Jaime Diamonds.

Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.

Are you suggesting that the billions of dollars the walmart heirs pocket every year are somehow going to help the unemployed, the disabled and those with special needs? Just think how much lower the prices would be and how many more people could be helped if the Walton kids only accepted millions more a year instead of billions.

Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone.

I would like to see some evidence that the "typical corporation" in America actually does pay out about a third of their profits to the government in corporate income tax.

And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government.

Highly doubtful. Evidence?

So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.

You have constructed a very nice fantasy. The government would probably take in more since the poor and middle class typically pay a higher percentage of their income in taxes than the wealthy do. Remember Mitt Romney's 14% effective rate?

So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.

And if corporations that can afford it start paying more the need for charities goes down and the need for government assistance goes down.

But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.

Actually we need more executives that treat their workers with dignity and like real human beings instead of just replaceable cogs in the money machine.

This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.

Legislation enable the immense transfer of wealth from labor to capital so why shouldn't legislation be used to correct the imbalance?

So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.

What specific regulations are you talking about? I don't remember you coming up with any when we had the "So what's a specific example of job killing regulations?" thread.

 

[untermensche]

High profits can either indicate monopolistic activity or cooperative activity amongst profit makers, collusion.

 

[BH]

Who decided what is to be regarded as efficient and how? For the sake of argument I could say the socialist bloc countries were the most efficient, if I were to argue that the basis for efficiency was right to a job, universal healthcare, free education, and so forth. And unless there was a period of civil war or war with another country it seems folks got their dinner on the dinner table too.

 

[Loren Pechtel]

High profits can either indicate monopolistic activity or cooperative activity amongst profit makers, collusion.

The companies with the high profit margins are generally those engaged in monopolistic activity--either due to patents or copyright.

Note that this is different than high total profit but a low profit margin.

 

[boneyard bill]

Wizardry writes:

In a perfectly competitive market, the profit of a firm is 0, because competitors constantly undercut each other on price to steal each other's customers until doing so would make the business unprofitable. A profit is therefore an indicator of a lack of competition.

The concept of "perfect competition" is a rather useless concept since it is unattainable just as perfect anything is unattainable. However, even operating within that paradigm, I don't see why that should be the case. Even with economies of scale bringing prices down, the producer sees a profit until he can no longer sell the item at a profit or there are no more buyers. Prices are set at the margin. At that point, it he has overproduced, he has to sell the surplus at a loss. But he has made money up to that point. Competition merely affects the point at which he must sell his surplus at a loss. In addition, of course, there are subtle differences in most manufactured products from one company to another so sales are matter of price but also a matter of quality and of customer preference.

Some sources of a lack of competition are good. If you innovate, then you can make a profit for a while until your competitors can copy what you've done. This is why competitive markets encourage constant innovation. But profits from each innovation should be temporary.

There, you've just contradicted your previous point. Temporary profits from successive innovations lead to permanent, or at least long-term profits.

Some sources of a lack of competition are there by design. Intellectual property laws are government enforced monopolies. They also allow business strategies like branding to make products from different firms imperfect substitutes of each other.

Intellectual property laws are property laws. You have a monopoly on your house because it is property.

Some sources of a lack of competition are necessary evils. Utilities are just intrinsically noncompetitive things

.

Not they are not "intrinsically" so. The high cost of entry into such fields makes competition difficult but not necessarily impossible. There are often alternatives to the prevailing utility such as solar panels for electricity. In Cleveland, the Cleveland Public Power competes with the privately owned Illuminating Company even though CPP isn't a power company at all. It owns no power plants. They buy their power at wholesale rates from nearby competitors of the Illuminating Company and re-sell it to residents and retail rates.

And a lot of sources of a lack of competition are bad. Monopolies, like John D. Rockefeller's Standard Oil, use their market position to drive competitors out of business to preserve their own profits.

What's wrong with that? The complaint against Rockefeller was that he lost money in order to drive his competitors out of business and then raised his rates. The charge is not true. It is just sour grapes from Ida Tarbell whose family was driven out of business by Rockefeller. But he didn't drive them out by losing money, and he kept his prices low. Tough for the Tarbell family but good for the consumer.

John D. Rockefeller himself was not a fan of the free market; he preferred "cooperation" that would grind out a steady profit to the competitive free market. "What a blessing it was that the idea of cooperation, with railroads, with telegraph lines, with steel companies, with oil companies, came in a prevailed, to take the place of this chaotic condition in which the virtuous academic Know-Nothings about business were doing what they construed to be God's service in eating each other up." --John Davison Rockefeller: Enemy of the Free Market.

Not surprising. I never said that entrepreneurs liked competition. Unfortunately, people like Rockefeller found a way around it by insisting that industries should be regulated therefore keeping competition down. It was called "Progressivism" and was claimed to be a way to "protect" consumers, but it doesn't do so, and the chief promoters of it were usually agents of J.P. Morgan, the Rockefellers and other plutocrats even they sold it, and still are, as something beneficial to the common people when, in fact, it is the exact opposite.

And of course the reason why oil can't stay cheap forever is that the prices of things are set by supply and demand, and people like Henry Ford come along and invent useful machines that run on oil, which causes demand for oil to increase, raising the price of oil. And the supply of oil can't be expanded indefinitely to match because oil is a finite resource and John D. Rockefeller took it out of the ground to be burned. And now that oil is gone forever.

But you also have to look at the regulations on oil that have increased its cost and reduced its availability.

The utility of money decreases the more you have. It's a bigger improvement to go from broke to $1 million than it is to go from $1 to $2 million. So if a firm has made a bunch of profit, it would be more beneficial overall to distribute it to employees or customers, than to the presumably rich owner. Now the owner has the legal and moral right to decide to keep it, but that doesn't change the fact that "keep it" is morally inferior to "help others".

I've already responded to this, and your post here does not address my response.

 

[arkirk]

There are a number of threads here that deal with profit, but they have been up so long that they are bogged down in narrow issues. So let me re-new the debate by focusing on the role and functionality of profits.

The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.

Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.

"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."

Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?

Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?

Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.

Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone. And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government. So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.

So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.

But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.

This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.

So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.

Your argument externalizes so many of the real costs of operation of both the Ford and Walmart plants. These costs are being borne by society as a whole and Walmart and Ford both were and are parasitic on the social environment in which they operate. The issue is how can we fit our human economy into this earthly environment and be sustainable. The enterprise models you chose were both from the 20th Century with its ignorance of what we were doing to the environment with our industrialization.

Walmart HAS TO HAVE SOME ABLE BODIED PEOPLE MANNING ITS COUNTERS, WAREHOUSES, TRUCKS, ETC. In order for them to be able bodied, it has to contribute to their maintenance, just like it has to contribute to the maintenance of machines. It has not paid sufficient wages to these people and they have had to go to the County for supplemental funds just to stay alive and healthy. Walmart competes with stores who do pay a fair wage unfairly, driving all wages down as companies that do not follow their model cannot compete. So the County ends up subsidizing all the employees in time.

I have not even touched the environmental damage issues of these companies. They in the end are losers, even if they manage to somehow survive. Our environment and our people are losers. All major industrial functions of society must be regulated or we produce bad examples like Ford and Walmart and Chevron.

 

[boneyard bill]

ksen writes:

Thanks for starting the new thread bill. Hopefully this one won't get bogged down like the other ones but I suspect that the usual suspects will come in with their usual piercing questions to take this thread where all the other ones typically go. Of course there's a remedy for that which is for everyone else to stop taking the bait but taking the bait seems to be prerequisite to posting on a messageboard.

Ok so far

.

Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.

True, and there were attempts to bring profit into the mix.

"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."

Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?

What do you mean by "coercion?" Are you limiting that word to only coercion by government?

No. I specifically mentioned coercion then added examples from government. But certainly Mafia activities would constitute coercion and therefore are illegitimate for that reason.

Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?

Are you trying to frame the debate as people on the Left not wanting lower prices if it means more goes to the owners? I would much rather have an economy full of Henry Fords and Arthur T. Demoulas' than Lloyd Blankfeins and Jaime Diamonds.

The Blankfeins and the Dimons are specifically examples of people who benefit enormously from government regulation and favoritism.

Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.

Are you suggesting that the billions of dollars the walmart heirs pocket every year are somehow going to help the unemployed, the disabled and those with special needs? Just think how much lower the prices would be and how many more people could be helped if the Walton kids only accepted millions more a year instead of billions.

Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone.

Obviously, I am not merely "suggesting it," I'm stating it.

I would like to see some evidence that the "typical corporation" in America actually does pay out about a third of their profits to the government in corporate income tax.

That's hard to do because accountants can make things look pretty much the way they want to. So the figures you get from outside sources will likely reflect the bias of the sources. But I'm not aware of any tax loopholes that would particularly benefit Walmart. It's entirely different, of course, with the stockholders who can do their tax planning in advance and invest in whatever the want, but at corporation has a business plan that limits what they can do to avoid taxes. You can't compare corporate taxes with personal income taxes.

And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government.

Highly doubtful. Evidence?

Most state and many local governments Do have income tax do they not? And dividends are taxable are they not? This represents a form of double taxation since the dividend income has already be taxed at the corporate level and then is taxed again at the personal level. So I think my claim is reasonable. Perhaps it's 60% or maybe its 40%, but it is certainly significant. I doubt very much that a precise figure for what you are asking exists. We can only make guesses. But as former tax accountant I think I can make a better guess that most people.

So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.

You have constructed a very nice fantasy. The government would probably take in more since the poor and middle class typically pay a higher percentage of their income in taxes than the wealthy do. Remember Mitt Romney's 14% effective rate?

So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.

And if corporations that can afford it start paying more the need for charities goes down and the need for government assistance goes down.

How so? The people who are unemployed or unable to work need assistance more that people who already have a job.

But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.

Actually we need more executives that treat their workers with dignity and like real human beings instead of just replaceable cogs in the money machine.

That would enable the employer to pay even lower wages. Presumably an employer has certain requirements that are sometimes unpleasant, but that employer would have to pay more to attract workers away from places which offer a more congenial environment.

This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.

Legislation enable the immense transfer of wealth from labor to capital so why shouldn't legislation be used to correct the imbalance?

Why not eliminate the legislation the enables this immense wealth transfer? That would correct the imbalance far more efficiently than adding new layers of laws and bureaucracy.

So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.

What specific regulations are you talking about? I don't remember you coming up with any when we had the "So what's a specific example of job killing regulations?" thread.

I don't remember that thread, but you could start by eliminating the federal reserve system. This is the epitome of crony capitalism. You can also eliminate all regulations related to global warming. It's been a complete scam from start to finish. Eliminate the subsidies for ethanol, and repeal the tariff on imported ethanol. Eliminate the Export-Import bank. Eliminate all agricultural subsidies. Most of the money goes to Agri-business anyway. Eliminate the FDA. They approve as many bogus drugs as good ones and, even worse, often promote unnecessary or even harmful drugs. ADHD was practically unknown when I was a child. But since ritilan became available, it has skyrocketed as has the price. That's just a few. I'm sure I could think of more given a little time. Legalizing drugs would be another one. The war on drugs is a bigger problem than the addiction.

 

[boneyard bill]

There are a number of threads here that deal with profit, but they have been up so long that they are bogged down in narrow issues. So let me re-new the debate by focusing on the role and functionality of profits.

The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.

Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.

"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."

Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?

Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?

Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.

Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone. And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government. So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.

So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.

But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.

This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.

So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.

Your argument externalizes so many of the real costs of operation of both the Ford and Walmart plants. These costs are being borne by society as a whole and Walmart and Ford both were and are parasitic on the social environment in which they operate. The issue is how can we fit our human economy into this earthly environment and be sustainable. The enterprise models you chose were both from the 20th Century with its ignorance of what we were doing to the environment with our industrialization.

Walmart HAS TO HAVE SOME ABLE BODIED PEOPLE MANNING ITS COUNTERS, WAREHOUSES, TRUCKS, ETC. In order for them to be able bodied, it has to contribute to their maintenance, just like it has to contribute to the maintenance of machines. It has not paid sufficient wages to these people and they have had to go to the County for supplemental funds just to stay alive and healthy. Walmart competes with stores who do pay a fair wage unfairly, driving all wages down as companies that do not follow their model cannot compete. So the County ends up subsidizing all the employees in time.

I have not even touched the environmental damage issues of these companies. They in the end are losers, even if they manage to somehow survive. Our environment and our people are losers. All major industrial functions of society must be regulated or we produce bad examples like Ford and Walmart and Chevron.

I have not opposed legitimate environmental regulation, but I not regard global warming as legitimate. It's a theory that makes predictions that do not conform to observed data. Therefore there is no reason to accept it as a legitimate scientific theory. If Walmart or Ford are despoiling the environment then it is up to government to correct it since no individual enterprise can afford the expense if their competitors are not similarly burdened.

However, humans have always despoiled the environment. Our very survival depends upon despoiling the environment. At the same time, some human activities have made the environment more viable without that being the intent. We should not approach environmentalism as some kind of primordial pristine condition that we should somehow return to. Was the Ice Age and ecologically ideal state? Certainly not for humans. Climate is always changing and humans sometimes have some effect on that, but we shouldn't conclude and any human effect on the environment is necessarily evil. The climate will change whether we contribute to it or not.

Walmart may not be the best place to work. I don't know. I've never worked there. But they do pay higher than the minimum wage, and they offer benefits and that is a lot more than many employers offer. So why should Walmart's employees be given the benefits of Walmart's profits rather than more needy causes? The claim that Walmart should pay its employees more rather than, for example, contributing it to charity, is simply an arbitrary claim.

Behind this claim is simply an unspoken hostility to private property. Walmart's "excess" profits should not be disposed of as the Walmart family chooses even if they choose to do so for worthy causes. It is taken for granted in the model that Walmart's property is illegitimate simply because it is so large. There is no sense here of a legitimate or illegitimate profit.

I find those assumptions to have no basis in fact or reason.