Profit (economics)

“ What would be the consequence of this difference in the rates of profit for capitals employed in the different branches of industry? Why, the consequence that generally obtains whenever, from whatever reason, the average rate of profit comes to differ in the different spheres of production. ”

“ Profits an element in Cost of Production. Thus far of labor or wages as an element in cost of production. But in our analysis, in the First Book, of the requisites of production, we found that there is another necessary element in it besides labor. There is also capital; and this being the result of abstinence, the produce, or its value, must be sufficient to remunerate, not only all the labor required, but the abstinence of all the persons by whom the remuneration of the different classes of laborers was advanced. The return from abstinence is Profit. ”

“ In no case, we find, is the mere money which passes from one person to another, the fundamental matter in any economical phenomenon. If we look more narrowly into the operations of the producer, we shall perceive that the money he obtains for his commodity is not the cause of his having a profit, but only the mode in which his profit is paid to him.
The cause of profit is, that labour produces more than is required for its support. ”

“ The one school bases its main contention on the economic theory of profits; namely, that profits represent the balance remaining after deducting the cost of land, capital, and labor. The function of the entrepreneur, it is contended, does not in itself involve the owning of capital. Profit is the reward for combining the other factors of production and assuming the risk involved. Interest is a cost for the use of capital and it does not matter who owns the capital. ”

“ If it is strong and increasing, he will feel sure that the consumers will repay the whole cost of production, interest and capital included, and in addition the legitimate profit attached to the business. ”

“ By profits, must of course be understood the rate of profit; for a lower rate of profit on a larger capital may yield a larger gross profit, considered absolutely, though a smaller in proportion to the entire produce. ”

“ You compare a commodity, in the production of which the advances in labour remain the same while the profits of stock diminish, to another commodity 'obtained by a given quantity of labour, a given quantity of capital, and a given rate of profits.' Is not this supposing two rates of profit at the same time? ”

“ If the cost to make is less than the market, to bring the machine on the books at market would necessitate the taking of a profit of the difference between cost and market. No profit has been made, only a saving in capital investment. ”

“ The price of a thing, in most cases, consists of three distinct elements—the wages of the labour, the profit of the master who directs the labour, and the rent of the ground that furnishes the materials on which it is erected. ”

“ Capital and enterprise could, under such circumstances, be retained in the business at all only by an increase in the price of the product through reduced production, increased demand, or other means, so as to pay both the increase of wages and the usual interest of capital and profit to management. ”

“ But the same amount of demand and the same price, which enable this least productive portion of capital barely to replace itself with the ordinary profit, enable every other portion to yield a surplus proportioned to the advantage it possesses. ”

“ The main object in view is the control of any external or internal factors that affect earnings. Profit may be increased by economy of operation resulting from large-scale production, by economies in use of by-products, by the standardization of product and improvement of quality, and by the elimination of duplicate effort; or the control of sources of supplies or of a marketing organization, or greater ease in obtaining capital, or greater facility in dealing with labor, may be among the advantages obtained. ”

“ Returning to the question of interest on actual capital,—i.e., the excess of value produced over the cost of production,—the question as to what determines the value of a product leads to the assertion that capital-profit must be due to an advantage which the producer possesses over the marginal producer. ”

“ The value of all commodities which can be made in any quantity desired consists in the quantity of labour which is expended for the purpose of producing them. The value is expressed in the costs of production, the most important components of which are wages and profit. ”

“ The effect will be, that the same profit of business will be divided among double the number of men, while, at the same time, rents and the price of provision in market will be double. The clear profit of the merchant will therefore be reduced to one fourth part of what it was two years ago. ”

“ If the market price rises high above the cost of production, producers make a profit greater than the average profit made in the country. This induces them, by the appropriation of new land and the employment of new labor and capital, to increase their business. ”

“ Rent, Interest, and Industrial Profit are only different names for different parts of the surplus value of the commodity, or the unpaid labour enclosed in it, and they are equally derived from this source, and from this source alone. ”

“ When such profit is evidently not to be had, if people do not actually withdraw their capital, they at least abstain from replacing it when consumed. The cost of production, together with the ordinary profit, may therefore be called the necessary price, or value, of all things made by labour and capital. Nobody willingly produces in the prospect of loss. ”

“ As competition becomes keener and the margin of return per unit of product becomes smaller, he has to increase his volume of business to secure the same amount of profit as when he did a lesser volume of business.
To produce goods it is necessary to use the saved wealth of former periods to pay the expenses of materials, labor, management, etc., of the present period. One must consume wealth to produce wealth. After his product is made, he must seek the best market for its exchange or sale. ”

“ The third source of great wealth is manufacturing on a large scale. In this case the owner or borrower of capital plunders his employés who sell him their daily labor. The difference between the actual value of this daily labor, as expressed in the price of the articles it produces and the wages paid for it, forms the profit of the manufacturer, allowing of course, for raw material and other running expenses. ”

“ If the supply is either more or less than this, it is so accidentally, and affords either more or less than the ordinary rate of profit, which, under free and active competition, can not long continue to be the case. ”

“ But if the profits of all the different employers of those working people should be raised five per cent, that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit. ”

“ Speculation for economic theory is a purely commercial phenomenon, a hazarding of capital on the supposition that desires will be found ready and waiting for the commodity produced—with a sufficient offering of purchasing power to afford a profit. ”

“ That which is now called profit and interest cannot exist, as such, in connection with equality of exchanges, for producer and distributor would be alike remunerated, and the sum total of their labor would determine the value of the article created and brought to the hands of the consumer. ”

“ He is paying money away on every side, which he would not do if he did not expect a return, with a profit. By all these operations—by the [Pg 367] work of his horses and his labourers—by the increase in number, and the increase in value of his flocks and herds,—and by the harvest after the seed-time,—new produce is created which produces a return of capital, and ought to produce a profit if that capital is properly expended. The hope of profit sets the capital to work, and the capital sets the labour to work. ”

“ If labour is necessary to effect the exchange, that labour is in reality involved in the production, and, like all other labour, bears profit. Whatever number of men are concerned in the manufacture, or in the conveyance, have share in the profit ”

“ Relatively to the man of enterprise, whose specialty always supposes other manufacturers cooperating with him, profit is what remains of the value produced after deducting the values consumed, among which must be included the salary of the man of enterprise,—in other words, his wages. Relatively to society, which contains all possible specialties, net product is identical with gross product.
But there is a point the explanation of which I have vainly sought in Say and in the other economists,—to wit, how the reality and legitimacy of net product is established. ”

“ Before there can be any development of business there must be promise of a profit. If the business is more risky than the average there must be promise of a profit higher than the average. Take away this incentive and business stagnates. ”

“ That portion which he annually saves, as for the sake of the profit it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time, too, but by a different set of people, by laborers, manufacturers, and artificers, who reproduce with a profit the value of their annual consumption. ”

“ So employed, it yields, like any other capital, wages of labour and profits of stock. The profit is shared between the banker, who receives interest, and a succession of borrowers, mostly for short periods, who after paying the interest, gain a profit in addition, or a convenience equivalent to profit. ”

“ This being the definition of profits, it might seem natural to adopt, as a sufficient theory in regard to the rate of profit, that it depends upon the productive power of capital. Some countries are favoured beyond others, either by nature or art, in the means of production. If the powers of the soil, or of machinery, enable capital to produce what is necessary for replacing itself, and twenty per cent more, profits will be twenty per cent ”

“ It is not the absolute, but the relative fall of profits, which pre359vents capital from being employed in any particular trade: it is the difference of profit which sends capital from one employment to another. ”

“ The capitalist, then, may be assumed to make all the advances, and receive all the produce. His profit consists of the excess of the produce above the advances; his rate of profit is the ratio which that excess bears to the amount advanced. ”

“ According to the degree of competition, or by reason of other circumstances which we will examine in the next chapter, he can content himself with a rate of profit of 10, 15, or 20 per cent., which will serve him partly as an income and partly be expended in the development of his enterprise. The 28 per cent. profit generally forms a circle within which he fixes his manufactured price. ”

“ As the gross profit may be very different though the rate of profit be the same; so also may the absolute price paid for labour and tools be very different, and yet the proportion between the price paid and the produce obtained may be just the same. ”

“ The amount of the net profit to be distributed will be that proportion of the whole net profit which will correspond to the proportion of the wages paid as compared with the entire cost of production and the expense of the business. ”

“ It is of course involved in this simple-looking but far-reaching change from "Wealth" to "Value," that Economics become at once and throughout a science of Persons buying and selling, and no longer as before a science of Things howsoever manipulated for and in their market. ”

“ A large—by far the largest—part of what is usually called profit, therefore, should be treated as wages, and the forces which govern its amount are the same as those affecting the amounts of all other kinds of wages, such as are discussed in the preceding chapter. ”

“ In this way we can content ourselves with a very small profit; as our general expenses amount to the enormous figure of sixteen per cent., and as we seldom make more than twenty per cent, on our goods, it is only a net profit of four per cent at most ”

“ The value of Money, in a state of Freedom, conforms to the value of the Bullion contained in it. But money, no more than commodities in general, has its value definitely determined by demand and supply. The ultimate regulator of its value is Cost of Production. ”

“ It will come out in greater fulness and force when, having taken into consideration the theory of Value and Price, we shall be enabled to exhibit the law of profits in the concrete—in the complex entanglement of circumstances in which it actually works. ”

“ Thus, neither in its common meaning nor in the meaning expressly assigned to it in the current political economy, can profits have any place in the discussion of the distribution of wealth between the three factors of production. Either in its common meaning or in the meaning expressly assigned to it, to talk about the distribution of wealth into rent, wages, and profits is like talking of the division of mankind into men, women, and human beings. ”

“ Profits cannot be said to depend on 'the proportion which capital bears to labour,' for, where profits were lowest, most capital would be needed to produce a given return, and, where highest, least, in proportion (LI) .
25. By a rise in the value of money it is possible (though not probable) that a reduced cost of labour, materials, and machinery might be followed by an increase instead of a reduction, in their money value (LXIII) .
26. A dearth may increase profits and wealth by making labour cheap (LXIII) . ”