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Automation does not create profit, it reduces prices!!!!* *In markets ones with at least some competition Also, its important to note that even the machine ow

Automation does not create profit, it reduces prices!!!!* *In markets ones with at least some competition Also, its important to note that even the machine owners wont make profits in a competitive market.

worik 11y ago
"Also, its important to note that even the machine owners wont make profits in a competitive market." That is economics 101. But if you had stayed for the later classes you would have had to unlearn that. It is not true. Maybe that is because "competitive markets do not exist" as the libertarians say, but whatever, in the world in which we live the top automaters are going to make super profits. What will the world look like when the means of production belong to a small group? In a society (capitalist) where ownership implies control?
- randyrand 11y ago
  Even the automakers don't make super profits. And GM would have gone under during the recession. http://marketrealist.com/2015/02/intense-competition-leads-low-profit-margins-automakers/ http://marketrealist.com/2015/02/intense-competition-leads-l... Yes ideal competition is just an ideal. But given the right regulatory environment you can very extremely closely mimic that ideal. Maybe even surpass it in terms of encouraging competition.
dllthomas 11y ago
Won't make economic profits. That doesn't preclude accounting profits, which is what we tax. Limiting ourselves to Econ 101, everyone in a competitive market makes the same accounting profit they could in the next industry over - this "opportunity cost" is the difference between the two definitions of profit.
- randyrand 11y ago
  In an econ 101 competitive market you also will not make accounting profits. Think about about it...
  - dllthomas 11y ago
    "Think about about it..." Implying that I haven't is needlessly rude, and not providing an explanation is unhelpful. Please do better. "In an econ 101 competitive market you also will not make accounting profits." The way I learned it, if market participants are making less than they could elsewhere then some will leave. This lowers production and raises the price. This dynamic will raise the profits the remaining producers make until they're making as much (accounting) profit as they could at the next best opportunity, which leaves the economic profit zero. I don't see what drives the accounting profits everywhere to zero.
    - randyrand 11y ago
      Firms that have zero economic profits can still have accounting profits, yes. But if a firm has accounting profits, that means it's possible for another firm in the industry to price cut them. And in a perfectly competitive market they will. So accounting profits also fall to zero* Zero when accounting for the time value of money. I've read (for instance here http://catalog.flatworldknowledge.com/bookhub/21?e=rittenberg-ch09_s04 http://catalog.flatworldknowledge.com/bookhub/21?e=rittenber...) that firms can make accounting profit in the long run. But they don't go into the requirements for this to happen.... =( But I believe it is due to the time value of money - which, given a long term growing economy with relatively little inflation, will be be long term positive. I'm not for sure though.
      - dllthomas 11y ago
        "But if a firm has accounting profits, that means it's possible for another firm in the industry to price cut them. And in a perfectly competitive market they will." It's possible, but - again presuming there is positive opportunity cost - as soon as the economic profit falls below zero it is a better idea for them to leave the industry than to lower their profit further. I don't undercut your prices because I think I'll be taking home less money. I undercut your prices because I think I'll capture your business and make more money overall. If that leaves you (or some other participant) without the ability to make sufficient profit to stick around, you won't.

worik 11y ago

"Also, its important to note that even the machine owners wont make profits in a competitive market." That is economics 101. But if you had stayed for the later classes you would have had to unlearn that. It is not true. Maybe that is because "competitive markets do not exist" as the libertarians say, but whatever, in the world in which we live the top automaters are going to make super profits. What will the world look like when the means of production belong to a small group? In a society (capitalist) where ownership implies control?

randyrand 11y ago
Even the automakers don't make super profits. And GM would have gone under during the recession. http://marketrealist.com/2015/02/intense-competition-leads-low-profit-margins-automakers/ http://marketrealist.com/2015/02/intense-competition-leads-l... Yes ideal competition is just an ideal. But given the right regulatory environment you can very extremely closely mimic that ideal. Maybe even surpass it in terms of encouraging competition.

dllthomas 11y ago

Won't make economic profits. That doesn't preclude accounting profits, which is what we tax. Limiting ourselves to Econ 101, everyone in a competitive market makes the same accounting profit they could in the next industry over - this "opportunity cost" is the difference between the two definitions of profit.

randyrand 11y ago
In an econ 101 competitive market you also will not make accounting profits. Think about about it...
- dllthomas 11y ago
  "Think about about it..." Implying that I haven't is needlessly rude, and not providing an explanation is unhelpful. Please do better. "In an econ 101 competitive market you also will not make accounting profits." The way I learned it, if market participants are making less than they could elsewhere then some will leave. This lowers production and raises the price. This dynamic will raise the profits the remaining producers make until they're making as much (accounting) profit as they could at the next best opportunity, which leaves the economic profit zero. I don't see what drives the accounting profits everywhere to zero.
  - randyrand 11y ago
    Firms that have zero economic profits can still have accounting profits, yes. But if a firm has accounting profits, that means it's possible for another firm in the industry to price cut them. And in a perfectly competitive market they will. So accounting profits also fall to zero* Zero when accounting for the time value of money. I've read (for instance here http://catalog.flatworldknowledge.com/bookhub/21?e=rittenberg-ch09_s04 http://catalog.flatworldknowledge.com/bookhub/21?e=rittenber...) that firms can make accounting profit in the long run. But they don't go into the requirements for this to happen.... =( But I believe it is due to the time value of money - which, given a long term growing economy with relatively little inflation, will be be long term positive. I'm not for sure though.
    - dllthomas 11y ago
      "But if a firm has accounting profits, that means it's possible for another firm in the industry to price cut them. And in a perfectly competitive market they will." It's possible, but - again presuming there is positive opportunity cost - as soon as the economic profit falls below zero it is a better idea for them to leave the industry than to lower their profit further. I don't undercut your prices because I think I'll be taking home less money. I undercut your prices because I think I'll capture your business and make more money overall. If that leaves you (or some other participant) without the ability to make sufficient profit to stick around, you won't.