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Tuesday, July 11, 2006

We spin our wheels and webs.

This comes out of a comment I made on the Mutualist Blog.
Someone came right out and actually stated that profits are inherently monopolistic; which is an annoying "hidden assumption" many leftists bury in their arguments. By pre-assuming it, they therefore have framed it out of being subject to discussion, which makes it hard to argue for markets effectively. In response I said:

The truth is, profits are never self-sustaining, in a milieu of open finance. Under a "capitalist" finance system, sure, because capital funding is restricted to "proven winners" and those with connections.
But under an anarchist financial system, profit can never be more than a sporadic, unpredictable outbreak. As soon as a firm becomes profitable, people will finance competitors, reducing profits back toward the general rate of interest.
As more capital is accumulated, that general rate of interest falls near 0.

Marx saw this, but didn't quite understand it well enough to draw the right implications from it.


Which is probably because he didn't pick up on marginal utility theory. If he had, the world might be quite a different place.

TO CLARIFY: By putting "capitalist" in quotes, I meant to imply the so-called capitalist finance system we are currently living under, which is actually fascistic if anything, with chartered and regulated banking. (which creates the opportunity to expand fractional reserves without being checked by competing banks)

2 Comments:

Blogger Jeremy said...

So you're not convinced of Carson's argument that "profit" is an artificial scarcity rent above and beyond the equilibrium price approximating cost?

I'm actually having a discussion on my blog about this with an Austrian. I'm not 100% convinced of Carson's LTV reworking. But the more I consider it, the more I see why he went to such lengths to preface his later political and historic analysis of "actually existing capitalism" with it. If price approximates cost, and costs are almost always labor-based, then there's a very clean way to view profit as monopolistic and "coercive" from an a priori standpoint.

I've pledged not to make up my mind until I've given Menger the same reading I've given Carson, though.

11:00 AM  
Blogger Adem D. Kupi said...

I'd say that this "artificial scarcity rent" does exist, for so many reasons.
But this is not the only source of profit.
Any price-value differential creates a profit opportunity. These opportunities will arise sporadically in a market economy. (in fact they are necessary, to motivate people to "correct" them) This is the source of entreprenurial profit as described by the Austrians.
However in a restricted-market economy, there are other sources of profit which are monopolistic.

In general, any firm which makes sustained profits over a long period of time is benefitting from statist intervention. Otherwise, the mechanism I outlined above would increase competition to the point that profit over and above general return to capital would disappear.

I think the mutualists and austrians are looking at different parts of the elephant, so to speak.

11:21 AM  

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