Product or Profit?

[Patrick Anderson]

Treating profit as a reward for the current owners is an
enormous incentive to incorporate. In fact, I'm afraid it is almost
the only incentive nowadays.

But there is another reason that people choose to organize and work
together.

The other reason is actually the true, primary and original reason for
all production: *PRODUCT*.

The actual result of production is Product as a Good or Service.
Production doesn't cause Profit. Profit is something that MIGHT come
later if a Consumer pays a Price above Cost.

Profit is the difference between Consumer Price and Owner Costs

When I use the word 'PROFIT' I am talking about the difference between
the Price a Consumer pays, and the Costs the Owner incurred during
that production (and other, semi-hidden costs such as interest on
loans, insurance, etc.). Corporations already sort that all out and
report a final thing called 'profit', so these calculations can
obviously be performed.

When I use the word 'PRODUCT' I am talking about the output or
objective of that production. For example, the products of an apple
tree might be, apples, shade, and maybe even some wood.

When I use the word 'PRICE' I am talking about the amount a Consumer
pays - we'll assume it is in Federal Reserve Notes for now.

When I use the word 'COST' I am talking about the amount a group of
Owners pay before and during production.

PROFIT only appears when a PRODUCT is sold at a Price above Cost.


----


Ok, so that was all very elementary, but it must be outlined if we are
to move to the next observation that is somehow not obvious:

There is a special case in economics where the Price of a Product can
safely reach Cost, and where Profit can be zero.

That case occurs when the Means of that Production (the land, tools,
etc.) are Owned by a group that invested for the purpose of achieving
"at cost" access to that product.

Their "return on investment" is "at cost" goods (such as organic food)
or "at cost" services (such as cell-phone service).


Profit is not the only incentive, and can be replaced by *Product* in
the special case where Product Consumers Own the Means of that
Production.

All policies designed to insure price stays above cost (such as
destroying or limiting the growth of food, or trade tariffs, etc.) can
be phased-out in all industry where the Means of Production are
sufficiently Consumer-Owned.


Patrick

[Patrick Anderson]

LETTER FORWARDED FROM EMAIL:

RC wrote:

> Patrick Anderson <agnu...@gmail.com> wrote:
>> When I use the word 'PROFIT' I am talking about the difference between
>> the Price a Consumer pays, and the Costs the Owner incurred during
>> that production (and other, semi-hidden costs such as interest on
>> loans, insurance, etc.). Corporations already sort that all out and
>> report a final thing called 'profit', so these calculations can
>> obviously be performed.

> Isn't it possible that intangibles like "risk" are contained in that
> profit? Sure, an "evil" person could collude or restrict production
> in a monopoly to drive price higher than it should be, but that's not
> the normal case - if that's happening, litigation is in order and the
> world's not perfect so "evil" people will be around and do those types
> of things. I think profit is a measurement of risk combined with
> efficiency, generally speaking. Taking risks that end up succeeding
> and being as efficient as possible are both very good things and both
> are rewarded with profits. Many times those _liquid_ profits are
> re-invested back into the company to make the company that's doing it
> right stronger than other companies that are being inefficient or not
> taking risks that will push the industry forward. I think these ideas
> are key. Companies don't really set prices - consumers do. If people
> are willing to pay a high price because they get that amount of value
> out of it, then that will drive other companies into that market to
> get in on the profits, which then lowers prices as the companies
> compete for customers. So I think the prices and competition and the
> incentives auto regulate the price to match what risks are being taken
> and the efficiencies being found. It's not simply greedy people
> setting prices higher than costs. I could be wrong, but I think I
> make some sense. I'm not sure people want to be tied to non-liquid
> "products", which is what I think you're suggesting. Instead of
> getting profit in cash, the producers all get more product instead of
> profits. I just don't see that as flexible enough for people to be
> motivated by it. If I put pork and beans in cans, the last thing I
> want to receive as "profits" is pork and beans. I want dollars so I
> can pay for gas or heating or non-pork and beans food products, etc.
> Just some thoughts.
>
> R