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Under theoretical models of market economics, economic profit is the opposite of providing benefit to society. In perfect competition (which obviously isn’t pos

by baddox 8y ago

Under theoretical models of market economics, economic profit is the opposite of providing benefit to society. In perfect competition (which obviously isn’t possible in practice), market prices equal marginal costs (which is great for consumers), and economic profit is zero. Being able to charge more than the marginal cost of your product is a bad thing. It means you are benefitting from things that are bad for society, like imperfect information and barriers to entry.

nybble41 8y ago
> Under theoretical models of market economics, economic profit is the opposite of providing benefit to society. It would be more accurate to say that the opportunity for profit indicates that society is not obtaining the maximum benefit from the available resources. Under theoretical models of market economics you refer to there is no such thing as long-term economic profit. That's because profit is only realized by moving the economy closer to the ideal state, and in those theoretical perfect-information perfect-competition models you're already in the ideal state. In the non-theoretical world, however, things are never that ideal, and opportunities exist to earn a profit by addressing those deficiencies. > It means you are benefitting from things that are bad for society, like imperfect information and barriers to entry. I agree with you 100%. If society didn't have problems then there would be no opportunity to profit by offering solutions. That doesn't mean that you're responsible for those problems, however. Imperfect information is a fact of life, and providing better information is one perfectly legitimate way to earn a profit. Where barriers to entry exist, finding ways to break down those barriers is another way to profit. Now, if you're creating new problems for society, such as spreading misinformation and erecting barriers to entry where none would naturally exist, that's obviously a problem. Negative externalities such as these require restitution to the victims. At this point we've left the economic realm, however, and crossed into the domain of politics.

by baddox 8y ago

nybble41 8y ago

> Under theoretical models of market economics, economic profit is the opposite of providing benefit to society. It would be more accurate to say that the opportunity for profit indicates that society is not obtaining the maximum benefit from the available resources. Under theoretical models of market economics you refer to there is no such thing as long-term economic profit. That's because profit is only realized by moving the economy closer to the ideal state, and in those theoretical perfect-information perfect-competition models you're already in the ideal state. In the non-theoretical world, however, things are never that ideal, and opportunities exist to earn a profit by addressing those deficiencies. > It means you are benefitting from things that are bad for society, like imperfect information and barriers to entry. I agree with you 100%. If society didn't have problems then there would be no opportunity to profit by offering solutions. That doesn't mean that you're responsible for those problems, however. Imperfect information is a fact of life, and providing better information is one perfectly legitimate way to earn a profit. Where barriers to entry exist, finding ways to break down those barriers is another way to profit. Now, if you're creating new problems for society, such as spreading misinformation and erecting barriers to entry where none would naturally exist, that's obviously a problem. Negative externalities such as these require restitution to the victims. At this point we've left the economic realm, however, and crossed into the domain of politics.