What is profit?
During a recent debate on Oekonux mailing list, Patrick Anderson gave some theses about the relationshp between profit and competition. He wrote:
Profit disappears when Competition is Perfect, but Competition is usually not Perfect, so Profit is usually not Zero.
Profit and Competition are inversely related, while Profit and Monopoly are directly related. A Perfect Monopoly would enjoy Infinite Profit, right?
I found, that these theses are wrong, because they base on on the assumption, that profit raise from the circulation of commodities. Profit is not explainable as a difference of prices. But where else did the profit come from? What is profit at all?
Profit is surplus value related to the invested capital. Although it seems that the capital is the source of the surplus value, it is not the case — it is the labour power. The labour power has to be paid. This payment in the societal average determines the value of the labour power. The amount of value the labour power produces above its own cost is the surplus value.
When competition is „perfect“ then commodities are sold at their value. The commodity value is the amount of necessary work to produce the commodity at given level of societal productivity.
The commodity value at which the commodity is sold includes the paid labour power and the surplus value. If you include the fixed capital (machines, material etc.) to be invested in advance, then you get the profit.
Then there are some cases for extra profit. Extra profit is a profit above a situation of „perfect competition“. Two examples.
First: Due to technical advances one company is able to reduce the amount of time to produce a commodity below the societal average. Now the surplus value increases, because the amount of products, which are necessary to pay the labour power, decrease. Given fixed costs remain constant (which is not the case, if a new technology is introduced), then the profit increases. However, all competitors are coerced to follow this this technology step, so that they can produce at the same productivity rate. Consequence: A new societal level of productivity establishes soon, and the extra profit of the advanced company vanishes.
Second: A company is the monopoly company in some market. Now they can dictate prices. They can not only realize the costs of the labour power used, not only realize the surplus value a the given level of productivity, but they additionally can realize extra or monopoly profit due to the absence of competitors.
Conclusion: Profit is the result of perfect competition, but extra profit disappears under this situation. Extra profit and competition are inversely related. Under no circumstances infinite profit is possible due to finite amount of value/money to pay this profit.
If profit and competition are not inversely related, then what is their relationship?
They are related in the sense, that competition is a general precondition of capitalism. Thus one can say, that profit is the result of perfect competition besides many other factors. But one can also say, that competition does only indirectly influence the profit height, because profit is generated in the sphere of production and not of circulation. In circulation the value, and thus the surplus value, and thus the profit is realized.
If profit and monopoly are not directly related, then what is their relationship?
Profit is independent of monopoly. Every company can realize profit if it is able to produce at the given productivity level and successfully sell their commodities.