The Paradox of Profits, parts 2 and 3

Part 2 talks about the necessity of the profit system.

In a modern, large-scale economy, coordination takes place through a combination of bosses and profits. Bosses order people to undertake particular tasks. Profits and losses provide incentives to engage in certain economic activities and to curtail others.

Part 3 talks about the risks of trying to “fix” outcomes of the profit system.

1. The profit system is partially self-correcting.
2. Attempts to impose corrections are not as successful as one might hope.
3. Rather than attempt to identify and correct market failures, it would be better to advocate policies that enhance the self-correcting mechanisms of the profit system. In particular, government interventions should be focused on enabling competition to overcome entrenched economic power.

The essays are now attracting readers. But my guess is that I am almost entirely preaching to the converted.

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9 Responses to The Paradox of Profits, parts 2 and 3

  1. Bill says:

    Maybe you are preaching to the choir, but my class will read the three essays next semester.

  2. collin says:

    3. Rather than attempt to identify and correct market failures, it would be better to advocate policies that enhance the self-correcting mechanisms of the profit system. In particular, government interventions should be focused on enabling competition to overcome entrenched economic power.

    What if the future of retail is less profits? We are in era of historically high profits and loads of investment dollars out there.

    Investors might be over-funding Amazon for the ‘right reasons’ because they know how to play long game and the business model of Target and Wal-Mart were effectively 15 years ago and several large retailers are on the verge of failing.

    Additionally, look at grocery stores? For decades there has been consolidation to increase profits and now the fastest growing grocery store is the private Aldis.

    • collin says:

      For all the complaints about Amazon overvaluation how would you model Uber is beloved by libertarians and investors but loses gobs of money? At Amazon:

      1) Makes some money
      2) Has lots of cash flow and cash to use
      3) Makes significant investments back into the company, most of which are successful.

      Uber is losing gobs of money and the some kind of Tech monopoly/oligopoly high profits looks like a pipe dream at this point. Yes, there will be a Uber or Uber like business…Lyft does relatively well. (And the driverless car tax model is still 5 – 10 years away in my opinion.)

  3. Steve says:

    Even in Denmark and Sweden, profits and losses play a major rule. Indeed government bosses are in some ways more intrusive in the United States than they are in those “socialist utopias

    Meaningful evidence to support the statement, please.

  4. Moo cow says:

    Good. Though I’m not sure how these essays are supposed to influence me, a more middle of the road Democrat. Social liberal, fiscal conservative etc etc. What is my take-away? What do I go out and do? Some profits good? Of course! I live on the coast. Profit good! But could I ever vote for Roy Moore? Seriously, that’s simply impossible.

  5. Tom G says:

    The huge advantage of a great essay, even if it’s preaching to the choir, is that the already converted who like the great essay can use it on their friends, or at least highlight in their Facebook front page, so some of their friends might well read it.

    Which I haven’t yet done, but plan to.

    Good job.

    Developing a YouTube presence, like Prager U is trying to do, might also be a way forward — can’t you become a visiting professor to some college to allow you to teach your Patterns of Specialization and Trade? You should consider dropping the “Sustainable” S and make it PST rather than PSST; For branding purposes! To make it much much easier for the not-yet converted. (I like the idea, have read the book; but had to look up again what the letters stood for certain.) S&T, Specialization & Trade, might be an even better brand, not to be confused with S&M (except to a few).

    An on-line recorded MOOC of your teaching, along the lines of Jordan Peterson, would be good for you AND the world.

  6. Philo says:

    Good preaching, even if primarily to the converted, is a worthwhile activity.

  7. Sam J. says:

    Everything this guy says is bunch of bilge water. If you have the right friends at the FED you can lose tens and even hundreds of billions of dollars and still make a profit. You can lose money like Amazon for over a decade and drive your competitors out of business while not making a dime and paying none of the taxes that a typical business has to pay. Those with the right friends can borrow vast sums of money and buy up profit making enterprises and milk them for every last dime. They can even bankrupt them and still make money. They can move all their operations overseas and reap vast profits when they don’t build anything or in any way add to the profitability of the company. They just have large credit balances.

    All he says is just typical lies and bullshit so that boobs will believe they actually have a chance in the modern financialized economy. In reality we’re back to the Middle ages where you only profit if you’re in with the rulers.

    • Sam J. says:

      “…Everything this guy says is bunch of bilge water…”

      I shouldn’t have said this. It’s wrong. I said it in exasperation. I get that things could work like he said in an ideal world but we don’t live in that world.

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