- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Maybe in some cases. But I guess in most cases profit depends on labor as well as capital, so "return on capital" would be an incomplete and therefore inaccurate description of profit. The march of civilizations is a series of defenses that man has put up against the dread of pure existence.
Bingo. So you're saying rentier profit is theft...
But I think you're conflating profit and surplus. How about in most cases surplus depends on labor as well as capital, in which case "return on capital" can describe profit, and the surplus is divided between profit and wages? En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
If it is a political matter, then "return on capital" and "return on labour" are misleading and one should rather speak of "value added" by the production process as a whole, and "value captured" by different parties to the production.
Well, for one thing, labour cost is something a business organization or project pays out, while profit is something that it receives (specifically, it is that portion of income that is left over after all costs, including labor, are paid for). I don't quite see how labour cost could be confused with profit. The march of civilizations is a series of defenses that man has put up against the dread of pure existence.
In point of fact, one might argue that in the case of a particularly unproductive upper management, the shareholders (who are remunerated with "profits") add more value to a going concern than upper management (who are remunerated with "wages"), by virtue of making it easier to obtain operational credit at lower cost.
Another traditional view holds that profits accrue to those who own productive assets, while wages are paid to those who do not own the productive assets they employ.
But when you move up into the upper reaches of the organisation, both of these distinctions blur (in many of the bonus schemes lavished on upper management, they have all but disappeared). Management salaries become partly contingent on shareholder profits (or, in a more pernicious version, share prices). And management, not shareholders, are the ones who actually exercise control over the productive assets of the firm. Combined with the fact that upper management is very rarely fired for cause - they are normally bought out through golden parachutes - this raises a very real question as to whether the management cannot be said to co-own the assets in question, and thus whether their remuneration should be regarded as wage or profit.
This is not an entirely theoretical exercise. Non-profit organisations are permitted to pay market rates for management services, which means that when a non-profit becomes sufficiently large and complex (and "market rates" for upper management therefore take on an increasingly profit-like aspect), there is reason to question whether it does not, de facto, generate profit.
