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Profits ~= value of product - resources consumed There is nothing wrong with firms making profits, it is a sign of efficiency, and a sign of where resources sh
by nickff 13y ago
Profits ~= value of product - resources consumed
There is nothing wrong with firms making profits, it is a sign of efficiency, and a sign of where resources should be allocated; with time, the least efficient firms are eliminated, and only those which create the most value at the lowest cost remain. The problem is that the product (and its value) may not reflect the objective(s) of the policymakers and the public, and the chief goal of those creating any system should be to properly align rewards with desired outcomes.
- jjoonathan 13y agoEasier said than done. I think it's probable that some problems are so difficult to translate into proper market motivations that the cost of the perverse incentives inevitably produced by your attempts will consistently exceed the potential for increased efficiency and miraculous innovation that the market promises.
- nickff 13y agoYou are neglecting to examine the counter-factual. The current system is abound with perverse incentives and flaws. As to the difficulty of designing a new system; we have thrown money at a poorly designed system for many years with little success, perhaps a redesign would be worth it.