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Economic profit is not inefficiency, it doesn't matter regardless of whether the consumer or producer gets the surplus. Inefficiency is excess work that people
by gohrt 10y ago
Economic profit is not inefficiency, it doesn't matter regardless of whether the consumer or producer gets the surplus. Inefficiency is excess work that people do in service of their goals.
The high cost that is not profit, is inefficiency: Paying someone to do work is inefficient not because it costs money, but because the person had to do the work -- it would be more efficient if the work product could be created with less work.
(Compare cost of labor to cost of scarcity: It's not efficient to buy/sell a diamond -- diamond seller is very happy to sell their scarce good for very little work. The coal seller is less happy -- they have to do a lot more work to earn their revenue.)
- AnthonyMouse 10y ago> Economic profit is not inefficiency, it doesn't matter regardless of whether the consumer or producer gets the surplus. Economic profit is friction. If you replaced the profit-taking entity with one that performed the same function but took half as much profit then more surplus-generating transactions would take place. Which means there is more work being done for the same result, because e.g. the higher price causes the customer to spend twelve hours fixing his own car instead of paying an experienced mechanic who could have done it in six.