A race to the...

[afterzir]

Critics of capitalism say that businesses desire to produce

the cheapest possible product for their target market;

in other words, a race to the bottom.

 

However, the consumers desire the best possible product,

which acts as a kind of counterbalance.  

It looks like the two parties will meet somewhere in the middle.  

 

Does this mean that capitalism is a race to the middle?

Or is it a race to the top? (or is it neither?)

 

*aside: I think that socialism is a race to the bottom

 

Thanks

[shirgall]

Capitalism is a race to transaction, where all parties think they are getting something better than what they are giving away, based on what they know and what they need at the time of exchange.

[rosencrantz]

Critics of capitalism say that businesses desire to produce

the cheapest possible product for their target market;

in other words, a race to the bottom.

 

 

Those critics must be really stupid then, because the critique of Capitalism is that the economic profit for companies goes down close to 0 over time. Economic profit is not the same as accounting profit, though the two are often confused. Accounting profit measures the total profit of a company, whereas economic profit is relative to all investment opportunities in a given time. 

In areas like supermarkets where you have hard competition you will find that this theory proves to be true. Walmart may have a huge accounting profit, but their EVA is pretty low. They earn a lot of money not because their stores are really profitable but because they have a lot of them. 

See https://en.wikipedia.org/wiki/Economic_Value_Added

[dsayers]

Where does the concept of "race" come from? People are voluntarily trading across whatever spectrum you can imagine every day. If anything, the "race" is towards satisfying desire. I'm not clear on what the benefit of describing it as a race to top/middle/bottom would be.

[Anuojat]

Where does the concept of "race" come from? People are voluntarily trading across whatever spectrum you can imagine every day. If anything, the "race" is towards satisfying desire. I'm not clear on what the benefit of describing it as a race to top/middle/bottom would be.

 

I find it comes from thie idea from the left that comapnies and rich people are jsut hungry and greedy for more and more with apetite that doesnt relent kinda like a "stupid short term caveman" whom just wants BIGGER and MORE of EVERYTHING. And so on...

 

Which is complete and utter projection as almsot always is.

[Cuffy_Meigs]

I agree with dsayers that the race metaphor is unhelpful.

 

I think Ludwig von Mises' idea that transactions are based on the removal of unease is a good one. So you pay your taxes not because you are greedy but because it removes the unease you would feel from breaking the law. You buy an ice cream because it alleviates the unease you feel on a hot day at the beach watching other people eat them...etc. From the seller's perspective, you perform the transaction to avoid the unease of possessing something (the product) which you value less than the money from selling it. Once competition or demand reduces the profit you can make beyond a certain point, this unease vanishes so you stop selling.

[afterzir]

Some techno-utopians think that in the future (with things like nano-technology etc.)

people will do away with the concepts of work, barter, etc. and products will be made

without cost-cutting etc.

 

I'm skeptical of this, but they think their economy would be a race to the top.

 

(I now see that the "race to the" wasn't a great way to word things)

[Livemike]

Which would you prefer, making a product for $5 and selling it for $6 or making a product for $10 and selling it for $13?  Businesses want to produce the product with the greatest surplus of price over cost, not that with the lowest cost.

[aviet]

Some good points.
 

 

 

*aside: I think that socialism is a race to the bottom

 

 

 

That it is, in all areas of society, but its primarily a race to other people's bank accounts.