[p2p-research] Profit Measures the Payer's lack of Physical Source Ownership

[Ryan Lanham]

On Fri, Feb 12, 2010 at 4:07 PM, Patrick Anderson <agnucius at gmail.com>wrote:

> Ryan Lanham  wrote:
> > The Marxian stuff of owning means of production is meaningless.
>
> Are you saying ownership makes no impact on the Price a consumer pays?
>
> What is cheaper:
> A bunch of friends buy a large van to ride to work together.
> A bunch of friends rent a large van to ride to work together.
>
> If there is no difference between the Costs of Owning and the Price of
> Renting, then all rental agencies would be reporting zero Profits,
> right?  I'm sure that is untrue.
>
>
You're partially right as I see it. In many cases renting is far
cheaper...as with housing.  This isn't controversial.  Like I said, speak to
any advanced management consultant or venture capitalist and they will tell
you "assets are evil."  I first heard the words from PhDs at the University
of Chicago Graduate School of Business who were investors in a venture I
built.  Companies lease equipment all the time for exactly this reason.  If
renting was more expensive, no one would ever lease...and yet leases have
been amongst the fastest growing areas of business.  What is expensive is
idle equipment.  Buying large amounts of van you don't use...that is what is
costly.  Depreciation is the enemy...not a friend.


> When you own an apple tree, you get apples at exactly the Cost of
> production.
>
>
Actually, no you don't.  Once again, Marxian over-simplification.  The cost
of production is the cost of ownership--which includes purchase,
maintenance, removal and replacement.  All these costs are factored into
asset models.  Ownership is expensive.  That's why capitalists seek
productivity and returns.



> When you don't own the tree but want the fruit, you can buy them from
> another owner, but he will likely charge you a Price that is more than
> it really Cost to produce.  That difference is Profit.
>

The difference is actually specialization.  Guns and butter in Econ 101.  If
I make guns and you make butter, we can both have more of each.



>
>
>
> > It is the capacity to generate profits that is all important.
>
> No, the capacity to generate *products* is all that is important.
>
> Profit does not occur when a consumer owns the Means (or Physical
> Sources) of that product.
>
>
Profit occurs when people specialize.  Specialization is efficient.  Profit
used to be efficient.  It isn't any more because the costs of getting into
business are becoming extremely low (the death of Marxism...and
capitalism...ironically.)




>
>
> > Prices are set by demand and supply...not by production costs.
>
> Prices are affected by Costs because the Owners must recover at least
> what it Cost to produce, or they won't even "break even".
>

Explain Twitter or Facebook...or most venture firms.  It simply isn't the
case.



>
> The difference between Consumer Prices and Owner Costs is Profit.
>
> Profit increases as Consumer dependence increases, and decrease as
> that dependence decreases.
>
>
Again, no, it is the market price.  Once again, this isn't controversial
except for Marxists.  You can have huge productions of corn and the price
will not be the production price but the much lower market price.  That's
why markets (used to) work.  The trouble now is that technology has caused a
sea change.  Everyone owns a corn farm and people are organizing to grow
corn for free.

Ryan
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