Re: Profit versus Interest

On Wed, 05 Dec 2007 15:04:19 -0800, Lysander wrote:

On Dec 5, 2:07 am, The Trucker <mik...@xxxxxxxxxxx> wrote:
Smith and Ricardo us the word "profit" to describe the return to "capital"
and the word "interest" to describe the return to loaned money (in their
case, gold).

This is not really the case. Profit is more than the return to
capital. Profit is the return from all factors in production.

That is a lie, of course. I would expect nothing less from you.

See
Ricardo's definition of rent where he defines as the portion of the
PROFITS that are derived solely from the indestructible
characteristics of land.

This was nothing more than a slight slip of the pen by Ricardo. When
scanning the WON the return to land owners is styled as "rent" and the
return to capital is styled as "profit". Ricardo goes into great detail
concerning land rent and and styles it appropriately in most places in his
work.

Profit is not just the return from capital.

Oh but it is exactly that in Smith's WON, liar. And also in Ricardo's
stuff.

It can be had from using only labor and land. Rent is part of profit
and is the excess return from holding a grade of land above the lowest
grade.

In WON, rent was defined as the return to the owners of land. And it made
no difference to Smith as to _WHY_ the rent was forthcoming. It makes no
difference now as to why the rent of land is forthcoming. Economic rent
is the return above that which is necessary to keep the factor in
production. The cost of land is a big fat zero and any return to ownership
of it is rent. That is about as clear and concise and obvious as
anything can ever be.

This is true of the neoclassical economists also but for the
fact that they ALSO try to hide "rent" inside the word "profit".

Rent has always been part of profit.

Only when the shysters are allowed to define the word "profit" as being
whatever they would like.

See above and read Ricardo.

I have.
Ch.1, On Value in paragraph 1.32
"the profits of capital were greater or less"

Ch.1, On Value in paragraph 1.37
Speaks of the profits taken by the suppliers of the tools in the trade of
hunting and fishing and comments on the effect that wages will have on the
profits. But the profits are always derived from the ownership of the
tools. And this does not change anywhere (certainly nowhere in CH.1 with
many occurrences of the word "profit".

Ch.1, On Value in paragraph 1.60
An alteration in the permanent rate of profits, to any great amount, is
the effect of causes which do not operate but in the course of years;
whereas alterations in the quantity of labour necessary to produce
commodities, are of daily occurrence. Every improvement in machinery, in
tools, in buildings, in raising the raw material, saves labour, and
enables us to produce the commodity to which the improvement is applied
with more facility, and consequently its value alters.

I
would not call today's economics neoclassical in any way.

You will not call anything what it _is_ because it destroys your
ridiculous assertions.

We do not
use subjective measures of value

BWAHAHAHAHAHAHHAHAHAHAH!!!!!!! That may well be true, but it is more
because you don't have a clue what value might be.

and the way modern economics
approaches situations is entirely different from the classical
economist.

This part is actually true. You people proclaim that _ALL_ "value" is
based on speculation and ownership. It is just one big casino for you.

Sure things like comparative advantage still hold but
modern economics is derived more from the marginalist movements than
from the classical economist.

So called "modern economics" is total crap.

The marginalist approach sometimes gives
similar solutions to the classical economist but I do not see this as
evidence that modern economics is neoclassical. Even when the term is
used it often refers to some of the classical results holding, ie.
Solow with technological change, or classical ideas built in the
model, ie. labor human capital models where Smith's idea of
compensating differentials are incorporated.

As it turns out Smith and Ricardo also screwed up in that they really did
not go far enough with the concept of rent. Henry George comes the closest
to getting things right and he also screws up in his failure to properly
handle the question of money.


What the Trucker takes exception to, rightfully or wrongfully, is the
absence of the use of land in modern economics. The old Ricardian
definition no longer applies because land is no longer a factor that
is analyzed.

Yet another absolute lie from lysander:

But here is where lysander gets his lie:

Ch.1, On Value,ref in paragraph 1.88
In that case I should say, that wages and rent had fallen and profits
risen; though, in consequence of the abundance of commodities, the
quantity paid to the labourer and landlord would have increased in the
proportion of 25 to 44. Wages are to be estimated by their real value,
viz. by the quantity of labour and capital employed in producing them,
and not by their nominal value either in coats, hats, money, or corn.
Under the circumstances I have just supposed, commodities would have
fallen to half their former value, and if money had not varied, to half
their former price also. If then in this medium, which had not varied in
value, the wages of the labourer should be found to have fallen, it will
not the less be a real fall, because they might furnish him with a
greater quantity of cheap commodities than his former wages.

What we see is that the payments to "wages" and to "rents" will reduce the
returns to "capital", i.e. will reduce the _PROFITS_ which are nonetheless
still the return to _real_ capital. A variation in wages will also reduce
the profits as is much discussed in CH. 1. yet this does not infer that
wages are a part of or subset of "profit". The return to _real_ capital
will vary inversely with the cost of rent and wages. That does not mean
that "rent" is a subset of profits.

Modern economics does not see land as a direct input
rather more like a fixed cost.

And that is a very big part of why "Modern economics" is bunk.

For a factor with X labor and Y capital
can still produce the same amount of 20 acres or 200 acres of land.

This is really cute here.... We have labor and capital "producing" land.
Only in neoconomics is this possible.

Land may be a requirement for production but is not a factor of
production outside of farming.

BWAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!! But fiat money _IS_ of course.

Doubling the land and keeping capital
and labor the same does not have any impact on production.

However, by MOVING the capital and the labor to a different LOCATION we
will have a great impact on production -- please open a koolaid stand in
Alaska in the winter.

So we often
leave land out.

You leave it out because it is the primary source of income for the
people that keep you employed whether you are smart enough to understand
that or not. Smith and Ricardo and the Physiocrats had the same disease.
It goes with the territory.

Using land as an input only makes sense in farming.

Please find someplace to put up that office building that doesn't use any
land or any surrounding infrastructure. And since the land is "cheaper"
in Death Valley, then build it there.

Today Economist refer to rent as above normal profit.

That is actually horse***, and is defended by a minor "slip of the pen"
by Ricardo and not to be found anywhere in the entire Smith WON. And
it is exactly as I have said: They hide the "rent" in the word "profit".

Where normal
profit is zero economic profit.

Total horse*** again unless you want to run on the Marxian value theory.
And I don't think you really want to go there.

That is not zero accounting profit.
Zero economic profit is what happens in the long run under perfectly
competitive markets.

But of course, there is no such thing as that if you do not redistribute
ALL OF the rent. And that will probably get you real close to Marx (no
reward to risk and no advance).

In this case the opportunity cost of production
equals the explicit cost of production.

Opportunity is not a COST.

The opportunity cost being
what can be earned in the next best alternative. The idea is
equalization of profits among related industries.

No.... The idea is to *F*(K up the language so that communication
and rationality are destroyed.

Rent is not hidden in profit in modern economics.

With claims like you are making about Ricardo you can't possibly expect
anyone to believe that. But maybe you do...

Rent is the profit
generated from barriers to entry.

I think I can actually agree with that. And land ownership in perpetuity
is most certainly a HUGE and unproductive "barrier to entry".

There is a whole literature about
rent seeking behavior. Rent is not ignored. It is just now that
farming is such a smaller factor in the economy land is no longer seen
as an input and the old definition of rent is meaningless. Rent is
something related but entirely different in modern economics. In a
sense Ricardian rents arose from barriers to entry. Some had the
higher grades of land and others had a barrier to using that land. I
am fully aware this is what George's PHILOSOPHY, which Roy and some
other Georgist see as the Gospel and religion, was that the barring
people from land is criminal. A concept that can be easily traced not
to George but to Rousseau. A political theorist that I am not too fond
of, who is hard to read because he writes with so much sarcasm it is
hard to understand when he is being serious. None the less modern
rents are caused by all barriers to entry and not just exclusive use
of land.

I would normally delete this lengthy parade of prancing pig manure
but I thought I might keep it on display for all to see and smell. It
does hint that one of the primary intents of "modern economics" is
to hide the rent by declaring that it simply doesn't exist. It is a
marvelous venture into pure Republicanism; the idea that if you simply
ignore the reality and repeat the lie over and over then you actually can
"create a reality of your own".

But note the last sentence. It is quite telling. One of the major
thrusts in this lying crap is the "look over there" stuff. It is
sooooooooo very Republican. Misdirection, lie repetition, raising minor
nits to the level of major concerns, understating the major economic
forces so as to "hide the rent". The fertility of the soil is no longer
_THE_ major contributor of land rent. But _LOCATION_ most certainly is.

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org/extend

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