Monday, October 12, 2009

Perverse, Reverse Marxism: Capitalist Consumers Are Exploiting the Innovators and Producers?

From the WSJ article "Media Moguls and Creative Destruction: Competition Works to the Benefit of Consumers, Not Producers":

The consumer, not the producer, is the beneficiary of greater competition.


From the NBER paper "
Schumpeterian Profits in the American Economy: Theory and Measurement":

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits and then estimate the value of these profits for the non-farm business economy.

We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers. For the entire postwar period and for the nonfarm business sector, innovators are able to capture about 2.2% of the total surplus from innovation.


MP: It almost seems unfair that consumers engage in such blatant exploitation of producers and innovators, doesn't it? They do all of the entrepreneurial, innovative work, and we get all of the benefit in the form of lower prices, improved products and a higher standard of living. And then after we exploit the producers and innovators as consumers, we turn around and tax them on their minuscule profits with progressive income tax rates.... If only consumer and taxpayer greed wasn't so rampant.....

7 Comments:

At 10/12/2009 9:34 AM, Anonymous Anonymous said...

"They do all of the entrepreneurial, innovative work, and we get all of the benefit in the form of lower prices, improved products and a higher standard of living"...

Your're right Professor Mark, its just horrible how folks like Dean Kamen and Bill Gates are ignored for their contributions to better living...:-)

 
At 10/12/2009 11:13 AM, Anonymous Anonymous said...

Marx would just be another dead failure if his idiocy were not kept alive and promoted by the leftists that infest our colleges and universities. It seems that they have managed to capture nearly 100% of the value of the nations investment in "education" while leaving the consumer/student a great deal poorer.

 
At 10/12/2009 1:24 PM, Blogger QT said...

Anon. 9:34,

Thanks for the interesting interview with Dean Kamen.

 
At 10/12/2009 4:16 PM, Blogger PeakTrader said...

It depends on the industry or firm. Some industries or firms have rising prices, while others have declining prices. Let's be real. At Microsoft, for example, over 5,000 employees became millionaires. Four became billionaires, amassing a net worth of over $100 billion. Investors made tens or hundreds of billions of dollars on the stock's appreciation and dividends. Guess where all the revenue came from? Yes, consumers. I'm sure management minimized consumer surplus and maximized producer surplus, e.g. using the summation of individual utility functions through the price elasticity of demand, until MR = MC. So, it seems, the big winners at a firm like Microsoft (and many other firms, including older firms, e.g. Gillette, Coca Cola, Boeing, GE, Walmart, Caterpillar, IBM, Johnson & Johnson, 3M, etc.) are the capitalists, entreprenuers, managers, innovators, and employees. Of course, firms that eventually fail may benefit consumers at the expense of investors and producers.

 
At 10/12/2009 6:48 PM, Blogger Colin said...

The market is pro-consumer, government is anti-consumer:

http://www.coyoteblog.com/coyote_blog/2009/10/our-government-is-anti-consumer.html

 
At 10/12/2009 8:15 PM, Anonymous Anonymous said...

"Marx would just be another dead failure if his idiocy were not kept alive and promoted by the leftists that infest our colleges and universities."

I work at a univeristy and my years of education tell me you're a dick.

 
At 10/13/2009 2:56 AM, Blogger randian said...

It seems that they have managed to capture nearly 100% of the value of the nations investment in "education" while leaving the consumer/student a great deal poorer.

If federal grants for students go up $2k a year, how much do you think tuition is going to increase? It is inevitable that all such surplus accrues to the producer. I see similar things in Florida, where I hear radio ads for "up to $4,500 in state and federal tax breaks for a new air conditioner". Care to bet what a new A/C unit costs in Florida?

 

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