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My favourite explanation comes from Hayek [1]. Profit is a signal for other economic actors to move into the market to provide more goods and services. If somet

My favourite explanation comes from Hayek [1]. Profit is a signal for other economic actors to move into the market to provide more goods and services. If something is profitable it means people (society) sees value in it so it is right that we would want more of it to be produced. If we say no to profit, it means we extinguish a mechanism by which society can allocate resources. On top of this, it's impossible for resource allocation for most goods and services to be organised top-down. Knowledge about wants, desires, propensity to manufacture and supply is dispersed and distributed among billions of people (and always in flux). [1] https://www.youtube.com/watch?v=PoTVSsxiwGc https://www.youtube.com/watch?v=PoTVSsxiwGc

bombcar 3y ago
You have to combine it with the rent-seeking present in rental buildings; the rents will expand to drive out all but the most profitable businesses, which can be detrimental.
- Der_Einzige 3y ago
  Hence why the LVT and Georgism need to be revisited. Even economists agree that a LVT is the only kind of tax that in theory stimulates the economy.
  - bombcar 3y ago
    Both those encourage “best and highest use” as the real estate term goes, but that is not necessarily what we want to encourage in every case. Of course never allowing and redevelopment has its own problems, but the solution is probably somewhere in the middle.
TFYS 3y ago
While I'm sure Hayek was correct in his time, I wonder if it would now be possible to construct a better way to allocate resources than the price mechanism. Every person now has a device in their pocket with which to instantly communicate their needs, and we have the computing power to calculate at a scale that was unimaginable to Hayek. The price mechanism seems like a slow way to transfer information, and produces (possibly unwanted) side effects like wealth concentration.
- deleted 3y ago
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anigbrowl 3y ago
If we say no to profit, it means we extinguish a mechanism by which society can allocate resources. That's fine, we have others. Efficiency is overrated because it leads to excess concentrations of capital, an economic diabetes if you will. Knowledge about wants, desires, propensity to manufacture and supply is dispersed and distributed among billions of people (and always in flux). Amazon, Walmart etc. demonstrate this to be wrong in many respects; in any case nobody was arguing for central planning, so it's irrelevant.

bombcar 3y ago

You have to combine it with the rent-seeking present in rental buildings; the rents will expand to drive out all but the most profitable businesses, which can be detrimental.

Der_Einzige 3y ago
Hence why the LVT and Georgism need to be revisited. Even economists agree that a LVT is the only kind of tax that in theory stimulates the economy.
- bombcar 3y ago
  Both those encourage “best and highest use” as the real estate term goes, but that is not necessarily what we want to encourage in every case. Of course never allowing and redevelopment has its own problems, but the solution is probably somewhere in the middle.

TFYS 3y ago

While I'm sure Hayek was correct in his time, I wonder if it would now be possible to construct a better way to allocate resources than the price mechanism. Every person now has a device in their pocket with which to instantly communicate their needs, and we have the computing power to calculate at a scale that was unimaginable to Hayek. The price mechanism seems like a slow way to transfer information, and produces (possibly unwanted) side effects like wealth concentration.

deleted 3y ago
[deleted]

anigbrowl 3y ago

If we say no to profit, it means we extinguish a mechanism by which society can allocate resources. That's fine, we have others. Efficiency is overrated because it leads to excess concentrations of capital, an economic diabetes if you will. Knowledge about wants, desires, propensity to manufacture and supply is dispersed and distributed among billions of people (and always in flux). Amazon, Walmart etc. demonstrate this to be wrong in many respects; in any case nobody was arguing for central planning, so it's irrelevant.