Existing Alternatives Posted May 10, 2013 Posted May 10, 2013 I remember seeing a side question in one of the discussions on whether or not super-rich will exist in the anarchic society. But I can’t no longer find it, so I figured I start a separate thread… The short answer is No, the super-rich will not exist in the anarchic society. Here is why… Current view of economic theory states that profits consist of two major components: normal and economic. Normal profit is the minimum return that a business owner receives in exchange of his time spent running the business. If the return was any lower the business owner would engage in something else. It is effectively equals to opportunity costs incurred by the business owner. Think of it as a minimum pay that you would accept for your work, something that would make it worth you getting out of bed and putting on pants in the morning. Economic profit is anything in excess of the normal profit and is usually fleeting. If McD’s stat paying salaries higher than Wendy’s, those employed at Wendy’s will earn an economic profit. However, everyone employed at McD’s will swiftly apply for work at Wendy’s. Now either Wendy’s will no longer feel the need to pay extra, or McD’s will have to adjust their wages upwards, thus closing the gap. Economic profit is usually obtained by innovation, monopoly, or plain structural in nature. The structural nature refers to brief periods of time when the business finds itself able to charge excessive prices or pay diminished costs for no fault of their own (like a competitor exiting a particular market). Innovation’s benefit is highly unsustainable, as the moment a business develops a new product the market is usually flooded by similar offerings (think iPhone vs. Galaxy), in order to stay ahead the business would have to constantly innovate, which is highly costly and risky (No, I don’t think Apple will be able to stay ahead of the crowd forever). And, of course, monopolies are usually either caused or protected by state. So, in the anarchic society, with no state to support monopolies, opportunities of economic profit will be reduced to sporadic blips, caused by short innovation or random market movements. As the result, overall incomes will normalize and will be much closer reflective of one’s value contribution. To think of it, it would be Marx’ Workers’ Paradise.
Existing Alternatives Posted May 10, 2013 Author Posted May 10, 2013 Wikipedia has a pretty good detailed explanation of Normal vs. Economic profit. And I didn't even edit it...
Phil Posted May 13, 2013 Posted May 13, 2013 Also in a statist system entry to the market is restricted, it's very difficult to found successful new companies, because of all the regulations that work against you, because as a small businessman you don't have political clout, can't afford to hire a team of tax lawyers that circumvent national taxation etc., which are nearly prerequisites for success in a highly statist system, so existing companies grow very large, while relatively few new companies enter the market to compete with them. The result are huge corporations that can afford to pay their top level staff 1000 times what average employees earns and extreme economic inequality between individuals.
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