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What I see in their chart is profit margins are generally in the 6-8% range with dips down to ~2% after economic recessions. It would seem to me that profit mar
by goodcanadian 11y ago
What I see in their chart is profit margins are generally in the 6-8% range with dips down to ~2% after economic recessions. It would seem to me that profit margins may be slightly higher than the historical average, but only slightly (though I would need a chart with a much longer x-axis to say anything with confidence).
As for the free market (I believe "capitalism" is the wrong word to use) squeezing the margins to zero, that works great in theory. However, the real world is made up of real people with imperfect information, so maintaining a slightly above zero profit margin doesn't surprise me, even when averaged across the entire economy.
- nikdaheratik 11y agoYes, but you're missing some context. Specifically the theory that, historically, business profits have always been limited to a set percentage of overall GDP. Everytime it tries to expand beyond a certain point, the market seems to correct either through increased competition driving that number down or labor pushing back to get workers a greater share, or government taxation/regulation (in a few rare cases) pushing this back down. It may seem like a historically high range of a few percentage points is no big deal, but it would be very surprising for that amount to stay constant over time and (when you account for compounding effects), it actually would be a big deal if it did stay at that level.
- goodcanadian 11y agoI don't think I'm missing anything. What I was saying was that, from their chart at least, the current level appears to be completely normal or perhaps only slightly high. I'm willing to admit that their chart could be misleading, but they failed to clearly make their point and really didn't convince me that anything unusual is going on.