Talk:Profit (economics)/Archives/2012

Post Split Joined Thread

The original profit article was split into profit (accounting) and profit (economics) reflecting the general failure to understand the term, not conflate it with productivity, etc, without which the split would never have occurred and the article would treat the underlying thing as the unity it is. The comment in the "Lede Needs Rework" section at the now literally vacuous original article is no less applicable to this one. It's just another illustration of how the wiki No OR policy collides with the best Encyclopaedist traditions though, so ... carry on. The accounting talk is at talk:Profit (accounting). Lycurgus (talk) 19:30, 15 January 2009 (UTC)

seadce= Normal profit =

I updated the second paragraph in the section "Definition" on normal profits. Please have a look to see if I missed anything important. I think we should change the structure of this article. We should start by defining economic profit (which we do) then we should briefly explain all the components of opportunity costs (ie explicit and implicit) so that the reader can see where normal profits fit in. Zain Ebrahim (talk) 07:31, 29 April 2009 (UTC) –-------------------- defining E onomic Proxy as it is Contrasted with Normal profit-------- Though I understand much of what is being stated in in the 1st paragraph, it is states in a difficult and steward way. The common person/layman who does not know about he subject area would b extrememly confused. I believe an encyclopedia has tradtionaly been premonently used by laymen who are new to the subject. They usually would look at the encylopedia as a starting point, after whi h they would use this information to do more indepth research. I belie e that he article needs help in the verbave to make it clearer and easy to ubderunderand.

• • What? Honestly, what you did say? It really doesn't make any sense. No wonder you were struggling with the first paragraph. Stevenmitchell (talk) 01:36, 8 June 2011 (UTC)

An example of my statement is the statement that economic profit involves all oportunity cost, and. Normal profit shows the return expected and needed to convince People to I.vest I. The fir.

Rename Article

Economic Profit is not the usual use of Profit. Profit should be a disambiguation page. Mrdthree (talk) 14:20, 12 July 2009 (UTC)

POV essay

Recent additions by User:173.76.47.183 appear to be an essay with a non-neutral point of view. I reverted them once, but neglected to leave an explanation on the user's talk page. The user re-added the material, and I have now put the appropriate welcome message on their talk page. I suggest someone re-revert the additions. If no one does, I will do so myself in a few days. --Allen (talk) 02:56, 26 August 2010 (UTC)

Merge proposal

Lots of good stuff that could bolster this article; and the topics seem too similar to maintain two separate articles. - Jarry1250 ^{[Who? Discuss.]} 21:11, 24 November 2010 (UTC)

Untitled (post-event criticism of merge)

The original arrival should not have been renamed to "Economic Profit". It pertained only to Monopoly Profit. "Economic" Profit can occur in a variety of situations that do not involve "Monopolies", and for a variety of reasons, some of which don't always lead to a formation of a "Monopolistic Market". The original changes I made to the first (previously only partially correct) discussion on "Monopoly Profit" was focused on a Monopolistic situation only. Being thusly focused allowed the writing ("definition") to be extensively detailed concerning profit in a "Monopolistic" Market, while still allowing for as much brevaty as possible. Likewise, being focused allows he reader to choose to focus in on he "Monopolistic" situation if he or she wants to (without forcing them to read additional information they might find extranuous for their particular needs. The much better way is to provide links to any of these other discusions so that the reader can (only if they want to) go to each additional section for any additional information they might want. By putting everything on 1 webpage, you have included so many topics that you cannot help but be very lengthy and still miss a lot of details in each discussion. Yet, the reader has to read through all of this information that is packed onto 1 webpage just to make sure they get he "low down" on just the "Monopoly" situation. This is fine if they want all the information on the page, including every thing you wanted to know about "Economic Profit" and All of the possible situations it may appear IN. But for the reader who only wants to know about "Economic Profit" in (only) a "Monopolistic" situation, you have actually made it is a bother/hassle for him to delve through this particle. Guys, let's Stop and consider some if these matters before going too far and making things just too unwieldly.

I admit hat mozt — Preceding unsigned comment added by Mgmwki (talk • contribs) 17:28, 12 January 2011 (UTC)

Okay, a lot of points there to respond to. Firstly, I accept that with any merge, there is a cost involved in the fact that the user may not get to read at an article specific to their particular perspective (here, the monopoly perspective of economic profit). However, there are a number of reasons why I (still) consider the merge to have been a good idea.

Firstly, I do not feel that the cost in this instance is not particularly great. The resulting article is not long, and it is easy to find the section relating to monopoly profit. Further more, for obvious reasons, the old Monopoly profit article had to spend time defining economic profit, increasing the "unweildy" burden. And to my knowledge, there is not a single fact relating to monopoly profit that is not useful in an article on general economic profit, so upmerging is lossless.

But moreover, I feel that the benefits here clearly outweigh the costs of doing so. Namely, information is not duplicated, meaning that all of it is well maintained and updated. Would you have a separate article for oligopoly profit? Isn't that just a find/replace job on monopoly profit? In fact, monopoly/oligopoly profit and economic profit in general share a great deal in common e.g. how the profit is sapped by new entrants. The reader also gets to see other contexts and perspectives from their own.

Obviously, I agreed and still agree with the merge. I think a useful solution for readers coming from the "Monopoly" perspective might be to improve the Monopoly article, rather than creating a separate article for a subject about which there is very little unique to say. - Jarry1250 ^{[Who? Discuss.]} 19:01, 12 January 2011 (UTC)

---

I really must re-emphasize my original points. You have mixed in here "Externalities"??? Isn't that (at best) only distantly related to any kind of Monopolistic situation? You have thrown in "Oligopoly", indicating above, "monopoly/oligopoly profit and economic profit in general share a great deal in common". Yet, in reality, "Oligopoly" is a completely "different animal" from "Monopoly". A "Monopoly" involves a "Market situation with only 1 seller" with a "solo position" in the Market. On the other hand, an "Oligopoly" involve "only a few sellers, each anticipating the others' reactions", since each these firms "have a sufficiently large portion of the Market to need to consider the individual reactions of others to changes in price and output." The "Price Leadership" situation is the only Oligopolistic Situation that that even comes close to a Monopolistic situation. In fact, there is absolutely no Competition of any sort in a Monopoly because there is only 1 firm that determines the entire Market Supply. However, though Oligopolies make an Economic Profit, Oligopoly Markets do involve Competition for Customers, but each firm sets a price/quantity that will maximize profit after other large firms in the Market react to the firm's decisions. In fact, as soon as a second firm is added to a Monopolistic Market (making it Oligopolistic), the "Economic Profit" of the former Monopolist is significantly reduced because of the Competition from the Second Firm for Customers! Very different situations. I don't know why you can even imagine that these 2 situations, Oligopoly and Monopoly, can be called "Similar" (They are not)? Where do you get this information; certainly not from either a Textbook or any professional publication (found in the "Journal of Economic Literature" - JEL)? I would not trust an opinion stated in even a business magazine; for these many times deviate from actual accepted Positive economic theory in pursuit of some other set of Normative Goals. Can you state the source you used to make the statement, "monopoly/oligopoly profit and economic profit in general share a great deal in common", and then I can also respond with numerous Professional Sources that will state exactly the opposite (other than the 2 minor details I stated above).

If you want to reference all of the details and possible situations that involve "Economic Profit", why not define and explain these different situations under a separate individual heading somewhere else in the Encyclopedia, make a small reference to this section that contains a link to the explanation of the other (Economic Profit) situation within this reference. This is what I've seen done in most of the Encyclopedia, and is one of the things that is nicest about a computerized (online) Encyclopedia.

I'll agree that part of the prior "Monopoly Profit" discussion could have gone into the "Monopoly" section (with a link to that section within the "Monopoly Profit" article). However, you are here compounding that error; not fixing it. Though some of this article's discussion is good and has added a lot, some of it strays too far. Keep this "Economic Profit" discussion, and separate out "Monopoly"/"Monopoly Profit" and "Oligopoly" discussions into separate Encyclopedia sections and just (Briefly) refer to these other sections in the article, while providing a link to them.

I also suggest you briefly review your college textbooks concerning "Monopoly", "Oligopoly" (Cournot, Price Leadership, etc), and "Monopolistic Competition". This might be helpful/useful in our discussion. Even 1 of the "Economics For Dummies" books are actually good Brief references (like the "Oxford Dictionary of Economics" I use).
I look forward to your response, and the response of some others. Thank you. — Preceding unsigned comment added by Mgmwki (talk • contribs) 21:49, 22 January 2011 (UTC)

Just to add a point, in response to one of your questions; "Would you have a separate article for oligopoly profit?" Given the dissimilarities within the 2 models, Oligopoly and Monopoly, Yes, I would rather have a separate section for Oligopoly Profit. In fact, it would be nice to show how Oligopoly Profit is reduced more and more as more and more firms are added to the Market; until the Market becomes Competitive once there are Many Firms within the Market. There are some studies that indicate the number of Firms does not have to be "Infinite" to have a compeititve situation; even a relatively small number of Firms (more than in a Oligopoly in which each firm may have very large Market Share) can ensure a "Competitive Siuation". These are well accepted studies, published in professional Journals, thereby also allowing for acceptable Cites.

Apologies for not responding earlier, I missed that. I want to make it clear: I am not arguing that oligopoly and monopoly are the same thing or even similar; I am arguing that oligopoly profit and monopoly profit are very similar beasts, and the reader is better served by having one article than two. Do you have any substantive difference? (There might be one, I'm only low-level qualified in economics). - Jarry1250 ^{[Who? Discuss.]} 19:13, 31 January 2011 (UTC)

---

Yes, there is quite a "Substantive Difference" between Oligopoly Profit and Monopoly Profit. For a bit of a more complicated explanation of the difference, you can see the discussion in the PDF, .http://www.unc.edu/~normanp/unc410week10.pdf. This artical, explains how a multi-firm Monopoly (Profit), a "Cartel" (Profit) situation (involving some form of collusion), is substantially larger than (different from) the Oligopoly (Profit) Situation. The "solution" that is used in this model is the "Nash Equilibrium" for the Oligopoly planning and final outcome. If you look at this paper, you will see there is quite a "Substantive Difference" between the 2 models; and therefore they require separate treatment and explanation. In fact, it can be shown the same oligopoly model resolves into/becomes a Perfectly Competitive solution as the number of firms approach "infinity". Quite a difference from a "Monopoly" - especially a single firm monopoly! Check out the link. You can also check the (older) MIT "Industrial Organization" Reference that I have used in this article. — Preceding unsigned comment added by Mgmwki (talk • contribs) 06:09, 5 February 2011 (UTC)

Okay, I see what you are trying to say here; you would like to bring game theoretic modelling onto any discussion of oligopoly profit. I would agree to that. If the amount of material is small, then it could be included in the "Uncompetitive markets" section of this article; otherwise, I am happy to help writing an article on oligopoly profit that is not redundant to this article (WP:Summary style). Or do I misunderstand? - Jarry1250 ^{[Who? Discuss.]} 13:28, 25 February 2011 (UTC)

Thank you. Yes, I would agree a brief verbal discussion on the Game Theory might be nice to have. However, for understandability, I think it must be purely verbal and graphical in its presentation; remembering this is not for the Professional Economist/Financial Analyst only, but more for those with little expertise who would like to find out a bit more about the topic (like any Encyclopedia user). I don't think it serves the reader to have any kind of extensive discussion of "Oligopoly (Profit)"; i.e, it is not constructive in a General "Economic Profit" Section. I believe the most brief Reference to it should be made in the "Economic Profit" Section (As well as only a brief Reference to "Monopoly (Profit)") should be made here, while ensuring the explanation contains a Link to the section containing a more extensive explanation of each of these topics. This leaves it up to (the "Freedom" of) the reader (to Optimize the reading experience by) choosing either only the brief explanation here or the more extensive explanation of each topic in a section devoted to the particular topic (detail) the user wants to know more about. For example, the user might want to know more about "Oligopoly (Profit)", and might not be interested in the "details" in Monopoly Profit. Segregation, and "Specialization", allows the user to choose exactly what they need, while avoiding the additional "Cost" of reading through "Detail" he/she is not interested in. — Preceding unsigned comment added by Mgmwki (talk • contribs) 20:34, 26 February 2011 (UTC)

Allocative "Efficiency" in a Regulated Monopoly.

I think the "Allocative Efficiency" is misunderstood here. I believe that Allocative Efficiency should be associated with "Pareto Optimality". A "Competitive System" gives "Pareto Optimality" (Necessary) Conditions. On first thought, I don't think a "Regulated Monopoly" can do this (I haven't thought about this extensively, but I believe this is correct according to basic Theory).

I've changed the Verbage (Reference) under the "Regulated Monopoly" picture to avoid discussing "Allocative Efficiency". I believe any Reference to the Association (or lack of Association) of a "Regulated Monopoly" to "Allocative Efficiency" belongs in the "Allocative Efficiency" section of the Encyclopedia. The discussion in the "Allocative Efficiency" section can then have a Link to this section in its more detailed explanation.MGMontini (talk) 21:54, 26 February 2011 (UTC)

Article Needs an Expert

I don't really know where to begin. While this article addresses various fringe considerations of economics and profits, it never at any point, addresses what profits are with the bare exception to its definition in Classical Economics or at any point, their contribution to an economy. For some reason, the contributors to this article can't grasp the essentials of economics without diverting to its sidereal issues. While neoclassical economics possesses some of these considerations, post-neoclassical economics is largely devoid of these considerations and as it has gone astray of economic fundamentals, may in fact be the underlying cause of many of the Western Hemisphere's economic problems. At present this article appears to have been written by high school or college students that never mastered the fundamentals... Stevenmitchell (talk) 01:50, 8 June 2011 (UTC)

Hello. I'm the high school student who wrote quite a lot of this article. "the Western Hemisphere's economic problems" aside, I totally agree. In an ideal world there's no way in hell writing this article would be left to me. On the other hand, you show some understanding on the topic (enough to criticise the content, let's put it that way), so maybe together, with the help of some hard references, we can get some improvements underway. You mention:

• "what profits are". Perhaps you could expand upon this point; the neoclassical syntehsis definition of profit is presently referenced to Carbaugh, 2006.
• "their contribution to the economy" I must say is indeed beyond my level of understanding. Specifically, I could write about the contribution of accounting profit to an economy, but I would stuggle when discussing economic profit.
• "the essentials of economics" - may need some help here interpreting.

Hopefully we improve the article as a joint effort. (I shall try not to be too offended by your suggestion that I lack even "minimal competence".) Regards, - Jarry1250 ^{[Weasel? Discuss.]} 14:41, 8 June 2011 (UTC)

Meaning of the Term "Profit"

It appears that there is much confusion about this term. Surely when considering the production process the three Smithian factors of production Land, Labor and Capital need to be examined for their three returns Rent, Wages and Interest (to include Dividends, etc.). An individual, company or organization which is combining these three factors and is taking the three returns for distribution for their various employ then will have NO PROFIT! Any excess over payments for wages, rent and for the return to money investors (interest) and company shareholders (dividends) will be used to either a) give additional wages to the managers of the firm or b) provide for investment in new durable capital goods, raw materials, etc. None of these should really be regarded as profit in any strict manner of thinking.

Yet as we all know, without the profit-motive and "extra" earnings that come from an economic viable organization, there would be no incentive for it to operate. The term "Profit" is therefore the thing which drives people to become active in economic business, whilst in practice it does not need a definition in terms of the distribution of what results. Everybody who exchanges money for goods etc., thinks to him/herself that it is worthwhile to make this transaction (including the sales side of this deal) and that the trade has a quality called "being profitable" attached to it. Both parties are satisfied and think that it is good business. So what happens to this profit?

What do people do when they get some profit? Eat it? Do they spend it on themselves, invest it in savings, machinery, their children's education, their entertainment, their company's materials or buildings/machines etc.? All of these kinds of activities fit within the Smithian defination of the production process without the need for some actual profit to separately exist as a sum of money or a quantity of goods, services etc. No I'm sorry to say that the idea of a profit is simply what motivates people to act! Macrocompassion (talk) 15:27, 21 March 2012 (UTC)