Forums: Discussions for entrepreneurs and small business.

I`m a free-market capitalist, a conservative, and I hold that unregulated business is generally the best way to run an economy. I do agree that in those instances where a monopoly forms, government intervention often is a better solution than to let time resolve the problem. "Time" could mean decades, during which the monopoly would do exceeding amounts of damage.

We`ve got a lot of people on both sides of the issue regarding whether or not the oil companies today are making legimate or "obscene" profits. So that has me wondering how people perceive the entire concept of "profit."

• Profit: -- What`s left after expenses
• Profiteer: -- Making "unreasonable" profits, particularly for goods in short supply.

What bothers me very much is the word "unreasonable" in the definition of a profiteer. That smacks of subjective "feelings."

How does one define "unreasonable?" What`s wrong with the oil companies recouping their losses from previous years? We have lots of oil resources that are undeveloped mostly due to environmental and other government regulations. The only reason oil is in short supply is because of these other but related restrictions.

How much money do you think you want to earn from your business before someone else tells you it`s "too much?" At what point do you think you`ll feel guilty about making "too much money?"

Or, do you intend to keep your company small and restrained so that you don`t take "too much" money out of the economy?

Craig -

I`m interested to see how this plays in the forum. You`re picking at a scab with many people in general, but this is a community of self-made entrepreneurs...

I hold a very similar ideology to yours. Over the next few months you no doubt will be able to start a similar post about "price gouging" after a hurricane.

Without scarcity there would be no profits. And without profits there would be no motivation for anyone or any business to do any work that needs to be done.

So to call someone a profiteer or price gouger because they show up after a national disaster, for instance, is silly. They showed up... to do work that needs to be done. And because there is more work to be done than that one business can do, the business does work for the customer who needs it the most (ie - the customer who is willing to pay the most).

Blaming big oil for increasing fuel prices is lazy thinking in my opinion. Why are we okay with a collusive cartel of oil producing nations? Why do we never suggest that federal and state governments lower gas taxes when prices increase?

And the icing on the cake is the forced emphasis on alternative fuels that the government is promoting. All this creates is uncertainty in the oil industry. And guess what, the oil industry is now less willing to risk investing in the building of refineries because they fear a legislative nightmare that forces the country to use non-oil based fuels. The result - higher gas prices.

To answer your question - I plan to limit my profits to what I would make working for the minimum wage. I don`t think it`s fair to my competition otherwise. 

Hey there, Shawn :-)
You`re right, that this is a hot button for a lot of people. My main intent is bring out the difference between the concept of profits, without which no business can exist, and the term "profiteering."

Many people think capitalism means "making profits," and often add "...on the backs of the customers." That`s not true. Capitalism is an economic philosophy based on the principle of private ownership. Socialism is where the state or overall society owns the efforts of the citizen (and the citizen`s thinking).

Socialism began (long ago) with a wish to make life better for everyone in a society. Since then it`s meaning has been almost completely lost. Capitalism has indeed made everyone`s life better, under the principle that the rising tide raises ALL boats. America`s poorest still live far better than third-world country poor people.

Even so, today`s socialists continue to believe that left to their own devices, ALL business owners are greedy profiteers, wanting only more money, regardless of the consequences to anyone else. Okay, then if it`s *all* business owners, that means all the Startup Nation entrepreneurs, and everyone else who wants to start a business. Right? :-)

With a faulty definition of capitalism, too many people believe that all people and all businesses have a moral, social, and even legal obligation to "give back to the community." Then they wrap that with the idea of "unreasonable" profits.

We`ve had at least one political discussion that got fairly heated, on another topic. But this one cuts directly to the heart of owning a business. I too, hold that an ethical business person will have a different definition of "reasonable profit."

The problem is how to determine that reasonableness. From my perspective, I think the variance in "reasonable profit" makes the difference between a capitalist business person, and a profiteer. The dictionary seems to agree. But what is "reasonable?" Nobody knows.

There are several statements there that are debatable, however, doing so would derail the intent of the thread...




rea·son·a·ble   

Right, I get that "reasonable" is a consensus agreement using some form of reasoning. However, we`re once again to a point in history where that general consensus is attempting to dictate Law.

Another interesting problem is that if we`re going to hold that the underlying basis for using words like "profiteer" is the overall good of the society, then who is charge with that social well-being? Is it the private enterprise or the society`s government? Obviously, the latter.

Given that in the case of oil the government adds a large percentage of tax, which translates to the final price at the pump, shouldn`t the government reduce or remove that tax before confiscating profits from the oil companies? Especially since the government is responsible for preventing the increased supply by disallowing drilling in various locations.

The basic premise in communism is that people`s *needs* dictate the functions of the surrounding society. The greater the need, the better the moral justification. To say that goods and services divide by "necessary" and "voluntary" is one thing. But to then say that the state can control those necessary products brings up this discussion point.

It looks nice on paper to say that the control of the individual "for the greater (or common) good" justifies confiscating or controlling profits. As long as you aren`t the individual, then it seems like a wonderful idea. What if you ARE that individual?

"Most of the people," "consensus," and other vague terms shouldn`t form the basis for legislation. Erich Fromm is an altruist, with what appear to be socialist leanings, from some of what I read back in the 60s. I don`t think I`d agree that his definition is workable: Not when it comes to running the US economy.

And yet that`s where we are, these days. If I feel that you`re taking too much profit from ANY product, necessary or not, I have the option to either not spend my money or try to find a competitor. But I`ll argue that I do NOT have the right to force you to sell me your product at what I *feel* is a comfortable price.

Craig, you`ve brought up an issue that is quite complex. I can see this from many points of view, and I do agree with your general premise when we look at all products. I do think that oil companies live in a different category.
One question i have not seen asked is: Do oil companies exist in a free-market capitalist world ?  Right now I`m paying  to have the Strait of Hormuz remain open.
By `consensus` , my government has said that it is worth dying for, to keep the strait open.  Is this capitalism? Wouldn`t capitalism say "hey, oil company, if your supply is cut off you work it out".
There seems to be a double standard when it comes to oil. When its on the other side of the world, `Government please help`, but when the oil gets here we hear `wait, let capitalism take care of it`.
Now to contradict myself, I don`t think there should be special taxes on oil companies. We have a gas problem , not an oil problem, but I don`t think we should simply look the other way either and let the free market do what every it may to us when it comes to oil.

Manolo Blahnik shoes are worth exactly what people are willing to pay for them. Just like cigars, lawn mowers, gym memberships, and cement are worth exactly what people are willing to pay for them.

If cigars become too scarce, or cigar manufacterers attempt to "profiteer", and the price gets too high, I`ll choose to smoke cheaper machine rolled cigars or I`ll drink more Scotch.

If lawn mowers become too scarce, or lawn mower manufacturers attempt to "profiteer", and the price gets too high, I`ll hire a lawnscaper or I`ll put in a rock garden.

If gym memberships become too scarce, or gyms attempt to "profiteer", and the price gets too high, I`ll buy my own gym equipment or work out by lifting the rocks in my rock garden.

And if cement (a commodity by the way) becomes too scarce, or cement manufacturers attempt to "profiteer", and the price gets too high, I`ll build my building out of wood or steel.

So my actions as a consumer will quickly adapt to scarcity and overcome any attempts at "profiteering".

And something else will happen too. The competition will take the opportunity to innovate and enter the market with less scarce, less expensive, and/or more beneficial products.

Also manufacturers will become motivated to find new ways to do things. Deep sea drilling, oil sands in Canada, angled drilling, the increase in non-OPEC oil producing countries...

There is no such thing as a shortage or excess of anything - and likewise prices being too high or too low.  There are just amounts of stuff and prices of stuff.  You either want to pay and voluntarily obtain the stuff or you don`t. 

The whole analysis of elasticity has always seemed pointless to me.  yeah, it`s harder to do without electricity and tobacco and heroin than to do without apples.  So what?  That makes it moral to force suppliers to be "reasonable" with pricing of electricity and tobacco and heroin?  Likewise whether or something fits the definition of a commodity is simply not relevant to the use of force to control price.

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James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

Regarding whether or not oil is "different," no...it`s not. The federal government has introduced artificiality through regulation, just as any form of gov`t regulation removes the "free" from the concept of free-market.

Suppose we have 100 people in a group, just to pull a number out of the air. :-) And suppose 50 of them think profits for a product are *reasonable* and the other 50 think they`re unreasonable.

We now have no consensus. We can claim that one or the other of the 50 people are "unreasonable." Or we can consider that in any argument, the interpretation of basic premises can usually go in two opposing directions.

Now suppose we give those 100 people the power to make laws. (I know, it`d never happen........) What then?

To run an economy on "consensus" makes for some major problems. Add to it that these 100 folks aren`t always in charge forever. They only get to be in charge for some number of years, then have to ask permission to stay in power.

I believe that one of the most dangerous aspects of "consensus" government is that it usually throws out objective reason and ends up with people`s feelings. Where`s the objective argument that oil companies should be treated as "different?"

If there IS such an argument, then what about yours or my business? Why can`t or shouldn`t that be put into a category of "different?"

And if we say that the "different" category should be based on need, then ask any medical doctor who they think should be put in charge of dictating "need?"

As a pharmacist, I laugh [to myself] every time somebody waits until the last minute after using all their medication and suddenly runs in to the pharmacy with a story about how they "need" their medication right away.  First, not even they think they "need" the stuff that bad or they would not let themselves run out.  Second, nobody needs the medication.  They might want and benefit from it.  We have been duped into these artificial "needs" being allowed to form a basis for socialism [ala medicaid, medicare, etc].

 

 

 

 

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James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com