This can´t be so simple: If you make profits, somewhere, someone is becoming poorer.

Hello,

I find that statement above (the one whose titles my threat) very simple, and yet, I can´t find out any idea against it:

My point:

If someone, a company, a person, is making profit, someone else is becoming poorer. Why?. Because we have in the world a fixed amount of things. I am a newcomer when it comes to Economics, so, I guess this a very bad settled idea. For example, now I am thinking that fish, crops, watermelons, and so on, grow every year, so, maybe it is not like that, but, my general idea is: ECONOMICS IS ABOUT CHANGING WHAT I NEED WITH WHAT I HAVE, IN THE BEGINING OF TIMES AT LEAST. Now it is much more complicated of course but the foundations remains: The economy´s purpose is to have things I need or I want, for things that I have.

I think the idea is not very elaborated though. it is that someone, a friend of mine told me a moment ago: "don´t you see that every/each time someone makes a profit, a company, some else is doing bad, is getting worse, is loosing something that the other got?" . I see it very simplistic, but she argues that against companies, again big companies, but I suspect she doesn´t get it right (the whole idea), she is a very idealistic person thinking that the world would be a much better place without big coporations, but I told her that a small shop, if managed right, can become a large company.

 

So you don't see anything against what happens when a business make no profit? Really? Tell me something, these "big companies" I suppose they have people working for them, correct? Now....figure it out.

 

You don't have a car, so can only work for minimum wage at a store in walking distance.

You buy a car (where several business make a profit), and your payments are $200 a month (the finance company makes profits), but you can work in town and earn $500 a month (take home) more. Even after insurance, gasoline and maintenance, you earn $150 a month more.

Who loses?

Profits come from increased efficiencies (increased productivity). Assembly lines are more efficient than individuals building the entire product. Automation is more efficient than manual labor (and safer, with higher quality).

We are extracting more value from less resources, because the one resource that we have tapped only a little bit, is human creativity.

 

First, profits are not evil. Profits are to companies what wages are to people. Are you willing to work for free? Why do you expect companies to work for free. Companies have to pay wages to their employees so they can feed their families. Pay their taxes, creditors, so on and so on. If companies don't earn a profit, that can't do any of that.

Second capitalism is not win or lose. It's win win. You got cash. A local grocery store has tuna. Lots of tuna. The last thing the store owner needs is more tuna. So you trade. You give him something he needs, cash. You in return get something you want, tuna. Win win. You both get something out of the exchange.

 

In Economics, you learn that trade (of the base definition, any transaction) is not a zero-sum procedure, as value does not necessarily coincide with price. This typically applies to capital, but for basics it is of course valid as well.

If there was such a fixed set of goods, which there isn't, then populations would remain constant in a rather Malthusian way, but luckily technological advancements prevent that. Resources are finite and scarce, the amount of finished goods produceable from them can vary.

 

The problem is the way society is organized under capitalism. The workers create the wealth, then the bosses claim and waste the wealth created by others - the rich consume so much more than they contribute that it's crazy.
Think about it. All bosses contribute is basic organization of workplaces, and usually they delegate that to lower managers anyway. So they sit on their asses and steal the wealth we create. the workers are perfectly capable of working without bosses and reorganizing society to satisfy human need instead of profit - the Paris commune, Republican Spain, Yugoslavia and the early Soviet Union have proven that. In short, socialism.

 

Socialism is certainly more efficient (as long as its structured around individualism, rather than the cretinous notion that the socialist planner can somehow replace the market with nationalised industry). However, we shouldn't underestimate the success of capitalism (particularly in terms of macroeconomic evolution through technical progress). The idea that we have a zero sum game (or even a guaranteed negative redistribution effect) makes no sense. At best, we have a realisation in capitalism that the links between efficiency and equity are ignored. We therefore have a distorted view of pareto efficiency

 

When you buy something from a company, you are not becoming poorer. If I spend $600 on the new iphone, I am richer by 1 iphone and Apple is richer by $600. Wealth is subjective to the individual. Apple prefers to have $600 instead of 1 iphone. I prefer to have 1 iphone instead of $600. Allowing such a transaction to take place results in increased wealth for both actors in the exchange, for they each prefer the new situation to the prior one.

The problem with big companies is that government often subsidizes them, regulates them unequally, or interferes in such a way that makes it harder for smaller companies to compete or enter the market.

 

Huh, I guess I should have expected people to get on their soapboxes instead of responding to the question.

This is probably the biggest falsehood in that line of thinking. Compare today with how cavemen lived. We have a vast array of things they could not have conceived of, and vastly more of the things they could.

Very little in the world is a zero sum game. Realizing that will help you out a lot in your personal life as well. But in the context of businesses it is typical that they can profit and everyone else is still coming out ahead, perhaps because there is now a new product on the market we're all enjoying.

Secondly trades should benifit both parties, and generally people/companies/nations are better at some things than others.

For a typical simple example consider you and your friend alone on an island. Lets say you want to gather food and one can either fish or gather berries. It is very unlikely that your skills are exactly matched at both of those tasks. Maybe you're even at collecting berries, but one of you is the better fisher. It then makes sense for the better fisher to focus on fish while the other focuses on berries, and then you trade. In this case you are both better off for your transaction.

 

The issue is the form of profit being made. If it reflects economic rent created by market power than it can be worse than a zero sum game. Rather than just being a redistribution effect (with pricing power inflaming producer surplus at the expense of consumer surplus), it also creates a deadweight loss (where the profit motive increases inefficiency by destroying economic activity). Alternatively, if one takes a Schumpeterian approach, that market power may reflect technological advancements. Be careful with that stuff though as that approach essentially predicts that the successes in capialism will eventually give us socialism

 

So a form of technological determinism? That seems pretty flawed in my opinion. Like let's talk automation - sure a few capitalists could fully automate their businesses/factories/whatever, but if all of them tried it capitalism wouldn't work anymore because nobody would be employed so nobody would have money to buy products. I think that at a certain point the capitalists would come together and collude to stop technological innovation in manufacturing and other industries, kind of like how in the past car companies colluded to not introduce seatbelts because it would have reduced car sales as people realized that cars were dangerous.
The difference is that this time they could delay things indefinitely, and since capitalism tends towards monopolies it would be easier for executives to collude than in the past - and the stakes would be much higher with the potential to remove the market, not just temporarily reduce profits like with the seatbelt incident.

 

Both Schumpeter and Marx celebrate the successes of capitalism. The difference is that the former has more analysis applicable to the theory of the firm and how firms have evolved. That makes it powerful stuff, providing an analysis that rejects the negative views over market power encouraged by orthodox theory

 

it's this simple

foreign outsourcing sends are jobs overseas, no purchases or taxes payed by them

made in china purchases sends our money overseas

what are we left with?

foreign outsourcing + made in china = our current economy


.

 

'Its this simple' is almost always followed by prance and ponce. Outsourcing allows for greater gains from comparative advantage. Hallelujah!.

 

Trust me, I'm not one of the "Marxists" who doesn't appreciate the progress capitalism has brought, and I understand its superiority over the previous mode of production. I don't describe myself as an "Orthodox Marxist" either, the funny thing is that they (Orthodox Marxists) actually go against what Marx has said when they state his theories as the only way the productive forces and societies can developed instead of as general trends and tendencies and Marx wanted them to be interpreted.

I don't agree with Schumpeter that capitalism will evolve into socialism through parliamentary reforms, I believe what happened in Chile and other countries that tried to follow the "reformist path" refute that possibility. I understand he thought that the growth of self-management and industrial democracy would have a part to play but I think it's self evident that large traditionally run businesses are quickly cementing practically absolute monopolies, cooperatives and the like can't be the good guys and be competitive with these monopolies at the same time.

 

What comparitive advantage does unskilled labor have?

 

Stupid premise for the thread, you need to go write on a blackboard 1000x:

Trade is NOT a zero sum game!!!


http://www.oddgods.com/articles/2006/n24a
R.A. Radford - The Economic Organisation of a POW Camp

Perfect example of how, in a perfectly closed scenario ever single person involved in exchange was made better off without making one single person worse off.

 

I wasn't making any evaluation in terms of your political economic stance. Ultimately its a simple point that I'm trying to make. Consider, for example, Marx's analysis into property rights and how it can be applied to new institutionalism. There's no confusion to be had. Instead we can see how the attempt to provide a coherent theory of the firm has actually weakened the orthodox approach (I.e. By including the analysis spawned from transaction cost analysis they've actually let the cat out of the bag:whereby we can see how the orthodox approach is easily embedded within heterodox economics as simply a distorted and restricted viewpoint).

Its not as straightforward for the Schumpeterian stuff. Its darn useful for understanding the firm and appreciating that market power is not necessarily a negative phenomenon. However, the orthodox then get all confused and ignore the consequences for our understanding of how the economy evolves

 

This post is correct. It really is easy to understand. It is certainly not a zero sum game. Anybody who suggest otherwise is promoting an agenda and it is likely socialism. They should not be listened to. It is and always has been a total failure.

 

In this case it really is "this simple". See, here in the real world, not in academic fantasy land, we learn such things.

 

"If you make profits, somewhere, someone is becoming poorer. " Dumbest statement ever. Perhaps your friend thinks everything should be free or that a business must sell their goods or services at cost? What a stupid idea. Tell him/her to move to another Country, such as a Communist one.

 

i own my own business..if you are in an area where there is demand for what you are selling you will make a profit if you run the business correctly..the demand will allow only so many businesses to be around..if there are too many selling the same product then they profit less and the weak die off..thats how businesses work..so you always try to keep up with the changes and demands of what your customers want and what their needs are..

 

There is no such thing as a communist country. Complete contradiction of terms.

 

If the economy has a surplus of resources then there should not be a profit/deficit scenario. However, when there are scarce resources the profit/deficit scenario makes much more sense. So... If you have just traveled across death valley by wagon train and have not had any water for over three days and someone offers you a ladle of water for..... You get my drift. The right people, in the right place, at the right time, can profit from others misfortune, and be called heros.

 

The fatal flaw in your reasoning is at the beginning of your argument. The following statement is simply not true.

I suggest you go back to the beginning an re-think your basic premise. Oh, and never trust an idealistic person for economic theories. Seek out a pragmatist.