Forum Post: Profit is inflationary ....
Posted 13 years ago on Oct. 3, 2011, 11:05 p.m. EST by wavefreak58
(134)
This content is user submitted and not an official statement
I've been watching the proceedings on Wall Street with some interest. I've long considered the current economic system fundamentally flawed. While I cannot attend the "festivities" I'm heartened that such a voice is being raised.
One thing I can contribute is some fodder for the bright young minds. I posted an essay to my personal blog that is a "proof" that profit must either be inflationary, or it must violate Conservation of Energy. Essentially it is a quasi-rigorous argument that for one man to become rich another MUST become poor.
The essay is more the stuff of free association chats around beer, certainly not a formal theory. But I'm betting that it would cause some very interesting arguments.
Feel free to distribute it. Maybe it will induce a little intellectual anarchy.
It is the March 10, 2011 entry at http://bizarrebrainbazaar.blogspot.com/
Good luck to you. People really need to wake up. Keep speaking out.
What both of you fail to recognize is that this is an indictment of objective measure in economics, not any grand theory on how economics should work. In the real world, subjectivity rules. What happens if you strip it away an enforce purely objective measures? Then the pie does NOT grow, it only gets reconfigured.
Both of you apply a subjective valuation. "The pie gets bigger" because somebody says it does not because there is any REAL change in the underlying physical world. Even as we manufacture goods, all that has happened is that physical reality has been reconfigured. The "value" of that change is entirely subjective.
And for what it's worth, an energy source cannot generate wealth. It can only generate energy. Until somebody subjective assigns value there is no wealth or poverty.
In your hypothetical world, the world that has no petroleum products may not want them or need them. Then the value of the petroleum product to that world is ZERO. Mr X is now in control of no wealth at all relative the world he would sell his products.
But in true entrepreneurial fashion, Mr. X starts an ad campaign and convinces the other world that they really DO need petroleum. Suddenly, the subjectivity of value is invoked and what had zero value "creates" wealth. But the ONLY thing that changed was in the minds of the people. Physical reality is the same. The "bigger pie" did not even exist until someone thought it into existence.- at least on the world without petroleum products.
So ask yourself this, how much of what you think you need was not needed until someone that had something that you did not value convinced you that you should value it?
And my essay it not a theory, it is a thought experiment. If you read it focusing on the consequences of applying true objective measures to economic activity it holds together logically. It essentially states that valuation is a scalar that can be developed from ANY objective measure. Measuring such value in units of energy is just as valid as measuring it in units of gold. It is clearly too austere to be applied in real world economics, but it points the way to the essential instability of our current economic systems. They are intrinsically unstable because of the subjective and volatile assignment of value.
The entire Occupy Wall Street action is a result of this subjectivity. It is a reaction to the intrinsic unfairness of the current distribution of wealth.The concentration of wealth in a narrow percentage of the population is an expression of how subjective valuations are manipulated. How is it that a CEO now earns 400 times the average worker when not too long ago it was 40 times? What changed in physical reality that pushed the valuation of a CEO's activity to such heights? A CEO does nothing intrinsically different than 50 years ago. It can be argued that CEO's in general, as evidenced by the bailouts and general state of the economy, actually do a WORSE job of keeping the economy healthy. Yet their value has increased? This "value" of CEO activity has no true OBJECTIVE measure, it is only what those that decide on CEO compensation BELIEVE the CEO is worth.
World economies (except in recession) are growing pies. Your theory assumes we all get a slice of a static pie and so at its outset is flawed. Why the pie grows is fodder for a much deeper thread...
Let's consider two hypothetical worlds. One has no petrol products for energy production, the other does. In our hypothetical world with petrol products Mr. X gets 50% of the extra wealth generated from this energy source and 50% is evenly distributed to everyone else. Everyone is wealthier in this world than the world without petrol energy. Your theory fails.
scorch.