Economics Questions

Re: Define Profit

Wanderer — Mon, 23 Nov 2009 03:54:17 GMT

Any net benefit that comes from an action. Whether it's capital, a good or service, or the goodwill of someone else.

Re: Define Profit

Daniel James Sanchez — Sun, 22 Nov 2009 20:00:51 GMT

Here's Mises on the distinction between "pure profit" and "waiting profit" discussed above:

"In the context of economic theory the meaning of the terms concerned is this: Entrepreneur means acting man in regard to the changes occurring in the data of the market. Capitalist and landowner mean acting man in regard to the changes in value and price which, even with all the market data remaining equal, are brought about by the mere passing of time as a consequence of the different valuation of present goods and of future goods. (...) Thus every function is nicely integrated: the entrepreneur earns profit or suffers loss; the owners of means of production (capital goods or land) earn originary interest; (...). In this sense we elaborate the imaginary construction of functional distribution as different from the actual historical distribution." (Human Action, Chapter 14)

Re: Define Profit

Le Master — Sat, 14 Nov 2009 00:19:59 GMT

Almost forgot about Mises's Profit and Loss.

Re: Define Profit

Le Master — Fri, 13 Nov 2009 23:46:38 GMT

Dr Salerno has a good lecture on the subject. The part on profits doesn't kick in till probably nearly 45 minutes in, but it's worth watching or listening to in its entirety. He gives some great real-world examples. (I'll always remember this lecture because I was pulled over and issued a speeding ticket while listening to it.)

Re: Define Profit

Daniel James Sanchez — Fri, 13 Nov 2009 22:41:22 GMT

Jonathan M. F. Catalán:

This is true, although would not interest be a form of making a bet? Eliminate a bank as a mediator, and say that you lend a portion of your savings to someone who needs the money to invest. In return, you want some profit, or interest. Are you not betting on the fact that he may or may not succeed in his endeavour? Of course, he owes you the money regardless since it was in a contract, but you are also betting on the possibility that he might or might not be able to repay you (or that he will stick around to repay you). I guess, in a sense ,there is risk involved, but isn't it still risked-based profit?

In that case, some of the charge is a risk-based premium. But, minus that premium, there is a more fundamental stratum of the charge that is based on the spread between the value of present money and the value of future money. That stratum of interest, derived entirely from time preference, would be charged even in an evenly rotating economy, in which there was no risk at all.

Re: Define Profit

Jonathan M. F. Catalán — Fri, 13 Nov 2009 21:54:14 GMT

This is true, although would not interest be a form of making a bet? Eliminate a bank as a mediator, and say that you lend a portion of your savings to someone who needs the money to invest. In return, you want some profit, or interest. Are you not betting on the fact that he may or may not succeed in his endeavour? Of course, he owes you the money regardless since it was in a contract, but you are also betting on the possibility that he might or might not be able to repay you (or that he will stick around to repay you). I guess, in a sense ,there is risk involved, but isn't it still risked-based profit?

Re: Define Profit

Sieben — Fri, 13 Nov 2009 21:53:51 GMT

Lilburne:
Austrians distinguish between "waiting-based" profit ("interest", in the broad sense) and entrepreneurial, or "pure" profit (derived from making successful bets on uncertainty).

and "lame" profit derived from taxation.

Re: Define Profit

Daniel James Sanchez — Fri, 13 Nov 2009 21:42:15 GMT

Austrians distinguish between "waiting-based" profit ("interest", in the broad sense) and entrepreneurial, or "pure" profit (derived from making successful bets on uncertainty).

Re: Define Profit

Jonathan M. F. Catalán — Fri, 13 Nov 2009 21:36:36 GMT

In any case, this is the definition provided by Mises in Human Action:

Profit, in a broader sense, is the gain derived from action; it is the increase in satisfaction (decrease in uneasiness) brought about; it is the difference between the higher value attached to the result attained and the lower value attached to the sacrifices made for its attainment; it, in other words, yield minus costs. To make profit is invariably the aim sought by any action. If an action fails to attain the ends sought, yield either does not exceed costs or lags behind costs. In the latter case the outcome means a loss, a decrease in satisfaction.

Re: Define Profit

Jonathan M. F. Catalán — Fri, 13 Nov 2009 21:31:31 GMT

Esuric:

It's entirely different. Not just revenues minus costs.

Well, then explain it. But, it should be noted that revenues minus cost is not the only kind of profit considered in microeconomics, either.

Re: Define Profit

Esuric — Fri, 13 Nov 2009 21:20:36 GMT

Jonathan M. F. Catalán:
Both? I'm not sure how the Austrian definition of profit would be different from the standard meaning.

It's entirely different. Not just revenues minus costs.

Re: Define Profit

Jonathan M. F. Catalán — Fri, 13 Nov 2009 21:18:38 GMT

Both? I'm not sure how the Austrian definition of profit would be different from the standard meaning.

Define Profit

ViennaSausage — Fri, 13 Nov 2009 20:35:15 GMT

In the Austrian sense, is it a noun, a verb, or both?