Profits as inefficiency

[Psy]

So I though I would be clever when debating a capitalist sympathizer and have a thought experiment. Assuming the worker actually earns the value which they added to the commodity in their wages. That the purpose of production is to produce value that is exchanged for money of similar value. That the purpose of the capitalist class is to manage production.

Thus I went into the conclusion that profits = inefficiency, as the consumer had to pay for the 'labor' of the capitalist (again assuming the worker was compensated for the value they added to the commodity) which was not useful to the consumer.

While I still got the old, profits drives innovation response, I'd thought I share my thought experiment that went the other way to show you can't really defend profits even with capitalist logic.

[Die Neue Zeit]

Sorry, but in business practices, most capital investments aren't expensed (save for R&D). I think you need to distinguish between profits reinvested and profits paid out as dividends from retained earnings.

[Psy]

Sorry, but in business practices, most capital investments aren't expensed (save for R&D). I think you need to distinguish between profits reinvested and profits paid out as dividends from retained earnings.

True but mature industries doesn't have much capital investments that are actually useful to the consumer. For example General Motors is downsizing thus R&D is pretty much the only capital investment that is useful to customers.

[Die Neue Zeit]

True dat. Actually, it goes further: I think it was mentioned recently that joint research was being done between competing car manufacturers.

[Psy]

True dat. Actually, it goes further: I think it was mentioned recently that joint research was being done between competing car manufacturers.
I most started thinking that way to counter the stupid idea that capitalist deserve profits because their labor increases value through increasing efficiency, in the idea that the problem with the USSR was the managers had no profit incentive to make production more efficient.

Then I started thinking well where do they think the profits are coming from to provide capitalists incentive, even if we are assume they don't come from surplus value from labor (ie not paying workers the full value of their labor) they have to come from somewhere, it is not like they come from God or from the capitalist's ass.

[Die Neue Zeit]

BTW, you should note that you have two or three key notifications at the top right corner of your screen (below "Welcome, Psy").

[mikelepore]

my thought experiment that went the other way to show you can't really defend profits even with capitalist logic.

I think you're right. For a corporate industry, paying dividends is a deduction from available cash flow, just as taxes and the the electric bill are deductions. There is a disruptive practice of inserting this large negative term into the balance sheet once per quarter to send a payment to absentee owners who are scattered all around the world and have nothing to do with production. Even if one cares about the business and not the workers, profits are still an inefficiency.

The only way this isn't true is to view the whole business as a black box mechanism with invisible insides, as the investor does. A whole industry is nothing but a tube for pouring investments into one end, and seeing your original money plus profits fall out the other end. Then, since "efficiency" is defined as desired output over input, the potential for dividends and capital gains becomes the efficiency. But then the business isn't an industry to that person perspective, it's not something the human race does for any social purpose, it's just a roulette wheel.

[mikelepore]

That the purpose of the capitalist class is to manage production

This one is tricky. The claim that the capitalist does something useful and has therefore earned some entitlements is a claim that was added synthetically in latter days by capitalism's defenders seeking to grasp at anything that looks like a philosophical defense. It's not the most fundamental claim of the capitalist to having a right to the profits. The fundamental claim is simply that the capitalist knew of a way to do things such that there happens to be some money left over after the capitalist pays the bills, and, since there was nothing illegal involved, all contracts fulfilled, the capitalist may pocket any money that is left over. All the additional mythology beyond that, about the capitalist earning those profits by various means, being a wise proprietor, a creative genius, bearing risk, etc., was clearly tacked on to provide argumentation.

[Psy]

I think you're right. For a corporate industry, paying dividends is a deduction from available cash flow, just as taxes and the the electric bill are deductions. There is a disruptive practice of inserting this large negative term into the balance sheet once per quarter to send a payment to absentee owners who are scattered all around the world and have nothing to do with production. Even if one cares about the business and not the workers, profits are still an inefficiency.

The only way this isn't true is to view the whole business as a black box mechanism with invisible insides, as the investor does. A whole industry is nothing but a tube for pouring investments into one end, and seeing your original money plus profits fall out the other end. Then, since "efficiency" is defined as desired output over input, the potential for dividends and capital gains becomes the efficiency. But then the business isn't an industry to that person perspective, it's not something the human race does for any social purpose, it's just a roulette wheel.

I've noticed that too, capitalist sympathizers don't even think where profits come from, they seem to think it just poofs into existence like capitalism is this magic system where you get more value out then you put in.