….still not quite getting it:
To be fair to Mr Cameron, in his foreword to the paper he does stress
that: "We in the Conservative Party understand that profits are the
lifeblood of capitalism, the greatest wealth-creating system known to
man."
No, not really. It’s the pursuit of profits which leads to this cornucopia, not the achievement of them. When people see someone of some company making excess profits (defined as above the general rate, suitably adjusted for risk) then they all pile in looking for some of that free lunch. That increase in competition is what both increases consumer welfare by bringing prices down and at the same time reduces those excess profits.
You might think this is a quibble but it isn’t. If we say that profits themselves are what drives the system then we can fall into the trap of defending the status quo. BT made profits so we should not privatize it nor open up its market to competition for example (for we would expect a monopolist to make higher profits than a company competing in an open market). That’s obviously not the way to increase wealth: allowing more people to pursue profits in telecoms is: certainly, we the consumers have greatly benefitted.
Remember, it’s the pursuit of profits, not the profits themselves.
Leave a Reply