Profit is an indicator of market inefficiency. The equilibrium state for a market is zero profit.
What a dumb take. If I work all day to earn money, and I use some of it to pay my bills and save the rest, does that mean I’m being inefficient? Is my employer being inefficient by paying me more than I need?
That’s literally a guiding tenet of capitalism. Profit is an indicator of market inefficiency because not enough of a good is being produced to satisfy demand. The existence of profit in a market segment signals to others that they should enter the market to try to capture some of the profit, which lowers the profit each party gets. As competition increases, profits lower until supply is in equilibrium with demand.
If it’s a situation where competition isn’t feasible, then profit is an indicator that the business is artificially charging more than they need to.
Market efficiency is one type of efficiency. Is a widget maker suddenly becomes more efficient at producing widgets, they can sell more widgets at the same price, leading to increased profits.
Production became more efficient, but the market became less efficient, signalling that other firms should find a way to compete and get those profits, until competition drives prices down to the cost of production.
You are not a market segment, so your personal finances aren’t comparable.
Your boss is being inefficient if they’re paying more for labor than they have to. Labor is a market, and high wages signal to workers that they should enter a labor segment, which eventually drives wages in that segment down until an equilibrium is reached.
What a dumb take. If I work all day to earn money, and I use some of it to pay my bills and save the rest, does that mean I’m being inefficient? Is my employer being inefficient by paying me more than I need?
That’s literally a guiding tenet of capitalism. Profit is an indicator of market inefficiency because not enough of a good is being produced to satisfy demand. The existence of profit in a market segment signals to others that they should enter the market to try to capture some of the profit, which lowers the profit each party gets. As competition increases, profits lower until supply is in equilibrium with demand.
If it’s a situation where competition isn’t feasible, then profit is an indicator that the business is artificially charging more than they need to.
Market efficiency is one type of efficiency. Is a widget maker suddenly becomes more efficient at producing widgets, they can sell more widgets at the same price, leading to increased profits.
Production became more efficient, but the market became less efficient, signalling that other firms should find a way to compete and get those profits, until competition drives prices down to the cost of production.
https://youtu.be/b-4ry8ZLwoQ?si=1r0GU8HVCT7dC1OP
You are not a market segment, so your personal finances aren’t comparable.
Your boss is being inefficient if they’re paying more for labor than they have to. Labor is a market, and high wages signal to workers that they should enter a labor segment, which eventually drives wages in that segment down until an equilibrium is reached.