First I'd like to thank my opponent for accepting
this formal debate. Hopefully this will allow for
a civil discussion with our arguments being judged
on their merits.

The only way that humans know how to create new
value, that does not naturally occur in the earth
environment, is to expend their labour to mix and
modify available materials to create it.Since the
creation of money and markets, people have
hitherto been selling the commodities producted
thus for an income (Artisans & Farmers).

The concept of profit however did not occur until
the onset of the Capitalist mode of production, by
which I mean the concept of someone working for a
wage while owning neither the productive means
(Capital) nor the end product (Wage worker).
Within this mode of production, the value that is
created is still through the expenditure of human
labour, much like it happened for ages, but the
big difference is that the creator does not get to
retain it.

For example, if a commodity is produced that is
sold for net gain of 100$ (so 100$ are left once
raw materials have been paid), an Artisan would
retain the full amount and use it for whatever
purpose he deems necessary. However a wage
labourer creating the exact same commodity will
get to keep (say) only 40$ of that (his wage),
while the leftover 60$ will go to the owner of the
productive means (Capitalist). This is profit.

So: Profit = Selling Price - Wages - Raw Material
costs - Overhead (Maintenance etc)

My argument then is that Profit originates from
the surplus value (ie what is added to naturally
existing value) that human labour creates. It is
the new value that workers create but do not get
to retain.

First I need to object to my opponent's definition
of "Capitalist". What he has described is a
Merchant. Someone who simply buys cheap and sells
dear. But Merchants have existed for thousands of
years and are not a recent phenomenon. By this
definition, we had capitalists since the start of
civilization which is clearly absurd. A Capitalist
is instead one who controls capital, ie the means
of production, for profit.

Then there is the different definition both of us
have for profit. What Katpoo10 is trying to
explain, seems to be something different than what
I am and this is probably going to be a sticky
point. Specifically I wish to explain why the
profit as defined as the wealth that goes to the
capitalist within a capitalist mode of production,
exists. This is the profit that exists within a
Capitalist economy and this is different from the
net gain of an Artisan selling an product. The
difference is that the Artisan, for himelf, has
costs. The cost to survive and the costs to allow
him to be productive (eg entertainment). These may
are not "monetary" costs only in the sense that
they do not go directly into the calculations of
the product, but they are still very much a real
cost in the production process. For example, an
Artisan who likes to have a lot of luxuries (big
cars, plasma tvs etc) will have less money for
reinvesting into his productions and thus less
product.

The only reason thus we cannot define the
capitalist profit in this situation is because
it's not a capitalist production. There is not
clear separation of worker costs as there is in
wage labour.

Lastly I'd like to raise attention to the
definition of "Wages". My opponent claims that
they are "money paid in exchange for the
performance of labor, not for the products of
labor". But what IS the performance of labour if
not it's product? How else can one define this
performance if not by it's end result? The
performance of the labour of an Artisan is his end
products (and thus its exchange value). Why is the
performance of the labour of the wage-worker
something smaller?

I am certain that my opponent will deny these
argument on the definition but if one is free to
redefine his building blocks, if Capitalist means
Merchant and profit means income then anything is
provable on simple equivocation.

Now on to the actual arguments.

KatPoop10 argues that workers in a pre-capitalist
economy have no costs, since they did not make any
purchases in order to produce. But anything more
than a casual inspection of this claim shows its
falsity. As I mentioned above on my definition of
profit, artisans do indeed have capital costs (ie
costs to buy means of production). Why would they
not? Does not a Ironsmith require an Anvil and a
Hammer? Aren't these a capital cost? Then there's
also the cost of feeding and entertaining oneself,
which all workers had to do. This is again a cost.
In fact, this is the cost of the wage-worker as
well.

The only difference from the artisan mode of
production to the capitalist, is that in the
former, the worker decided how much of his income
to eat, how much to save, how much to blow away
and how much to reinvest. Under capitalism, these
decisions are split. The Capitalist decides how
much the worker should eat and enjoy, how much
should be reinvested in the productive process and
on top of that keeps something for himself for
making this "very important" decision.

So in fact, the demand for commodities does
directly translate to a demand for labour in an
pre-capitalist society as well. For how will the
commodities be produced if not by the labour of
the artisan? There are productive costs, as
necessary. There are costs. It's just impossible
to define "profit".

Despite all that, surprisingly KatPoop does reach
the correct conclusion in the end that in a
pre-capitalist economy there are no capitalists
(even though by his definition there would be
since merchants have existed since money was
invented) and workers retain the full return of
their labour. This is indeed correct as I pointed
out in my opening statement. An artisan or farmer
always receives the full exchange value of his
products.

But then my opponent's confusions shows up. He
rightly points out that there are no wages without
capitalists, which is right since wage-labour is
the defining aspect of the capitalist mode of
production, but then confuses the chicken and the
egg. If as he stated in a pre-capitalist society,
the worker gets to retain the full exchange value
of his product and then by the introduction of the
non-working capitalist he gets to retain less,
obviously we conclude that the capitalist
appropriates part of this exchange value. But
Katpoop10 surprisingly reaches the exact opposite
conclusion: It's the worker who deducts part of
the exchange value through his wage, as if he's
infringing on what was happening by itself anyway.


Let me put it another way. In a pre-capitalist
economy, the workers earned the full "profit" as
Katpoop defines it, but with the introduction of
the Capitalist, the same labour is reducing
"profits"!

But this makes no sense. If an Artisan was selling
a widget for 100$ and then was turned into a
wage-labourer for the same production earning 30$
in wages, apparently the profits have dropped even
though the same value is being created in the form
of the widget.

For this to make sense, one would have to assume
that Capital by itself is capable of producing
value and thus profits. That machines are somehow
working on their own and thus with the inertion of
wage-labour (which is not explained why it is
needed) the profit is reduced. But this of course
does not stand, for no machine, no piece of
capital can produce anything without human labour
behind it.

I will not argue the conclusion of KatPoop that
workers should be thanking the capitalist for
allowing them to be wage-workers instead of owning
their own means of production, as this is outside
the scope of this debate. I will only note that
this kinf of separation between who owns the Land
& Capital and who works it, did not happen
naturally.

KatPoop seems willing to insists on his
definitions even in the face of absurdity.

Apparently a capitalist is anyone who ever used a
means of production for sale. This would include
practically everyone except wage-labourers. From
farmers to artisans to what we actually call
capitalists now. He goes on to claim that a
pre-capitalist society was one which had only
subsistence farmers, but then says that those
farmers also sold part of their product. But
doesn't that make them "Capitalists" as well then?
They own their means of production and they sell
part of their product. However, all pre-capitalist
societies had Farmers and Artisans. The thing that
defines a pre-Capitalist society from a Capitalist
one, is not the existence of actual capitalists,
artisans or farmers but on who excerts the rule
(directly or indirectly) and which is the primary
mode of production in the society.

Even though KatPoops confused definitions cannot
display it, there is indeed a very practical
difference between a Capitalist, and an Artisan or
Farmer.

The Artisan/Farmer, use their own tools and labour
to create products, which they either use
themselves or sell for income. The both have costs
that affect the end production, but this does not
a capitalist make.

The Capitalist makes other people (wage workers)
use the tools they own (Capital) to create
products for them which they sell for profit. This
is what is commonly called the Capitalist mode of
Production. The Capitalist may work along in his
own company, even on the assembly line, or he may
not. He will still receive the profits on account
of his ownership of Capital. The fact that he has
his own living costs does not alter the above.

This fundamental difference cannot be ignored. It
is intellectually dishonest to claim that there is
no difference between a person working with his
own tools, for his own productions, and a person
having other people work for him. It is precisely
this difference that separates capitalists from
Artisans and Farmers. It's not the existence of
Capital. It's his reliance on wage-labour that
makes one a Capitalist.

There is also a fundamental difference between a
Capitalist and a Merchant. The difference is that
one own means of production while the other
doesn't. To achieve this apparent similarity
KatPoop has to make an equivocation on "Capital".
It appears as if they both own "Capital", but
there's a big difference between the Capital a
Capitalist owns and the "Capital" a Merchant owns.
While the former is a "means of production" the
later isn't. The merchant's "Capital" cannot be
used to produce anything. It simply allows the
merchant to conduct his business.

So having shown that a Capitalist is fundamentally
different from both an Artisan and a Merchant, let
us continue.

Going on to KatPoop's argument on wages, I see the
apparent circular logic on trying to define what
the "Performance of Labour". KatPoop argument
seems to rest on having different words for
"labour" and "product". This is obvious, but when
looking at this outside the limited scope of a
dictionary, we can plainly see that a (human made)
product cannot exist without labour. As such there
is an obvious and undeniable connection between
them. Obviously I do not say that they are one and
the same but rather that one is the end result and
the (lets call it) "crystallized" performance of
the other.

To make matters even more confusing, Katpoop tries
to define the "Performance of labour" as "the
labor that
is performed itself" which is nonsensical on it's
face. The "performance of labour" is the wages
that it earns from the capitalist, and we know
that the wages that the capitalist gives are
correct because they're the "performance of
labour". If that's not circular reasoning, I do
not know what is.

I am certain that KatPoop will deny these
fundamental problems with the definitions he's
using so I will not revisit them to save us all
rehashing of the same subject over and over again.
I will leave it to the audience to judge.

Moving on, I still see that KatPoop is confused on
what I claim profit comes from. He seems to expect
that I argue that it somehow comes from wages and
because wages as a concept does not apply to
Artisans and Farmers (obviously) then income is
profit. But this is simply again a clash of
definitions rather than an actual argument. I
never said that farmers and artisans were being
paid a wage, as such a concept only exists within
a capitalist mode of production. Rather what I am
saying is that profit in a pre-capitalist economy
does not apply as a concept as you cannot separate
the living costs of the producer from the capital
costs. KatPoop says that all income is profit, I
say it's just income, neither profits nor wages.
But we're effectively saying the same thing.

In truth, the problem occurs in later arguments
from this point as KatPoop makes no distinction
between Artisan "profit" and Capitalist profit
even though there is one as I showed above, and
thus performs an equivocation fallacy.

Nevertheless, KatPoop does make a more realistic
example from which we can see if his argument
stands. The example of the farmer buying a capital
good. I will show how variables in that example
are hidden or ignored to reach the desired
position.

In it, we are told about a farmer that decides to
buy capital goods will have less than 100% profit.
But this does not stand. If profit as KatPoop
defines it is simply all income that comes from
sales, then this too will be a 100% percent
profit. The farmer will simply be more productive
with his new capital and produce more which will
soon make up the cost of the capital expenditure.
In any case, this is not an important point as
it's much more important to look at how KatPoop
introduces wage-labour into the equation.

He claims that the Farmer will now hire some
workers to help on the farm. The way this offhand
statement is made, implies that the work of the
wage-workers is not really necessary and the wages
they are paid are being reduced from the pure
profit. But in fact Katpoop makes a fatal mistake
in this analysis. If the wage workers were not
needed, then they would not have been hired. As
such the labour that the extra workers add to the
collective labour of the farm is necessary.

To make this a bit more clear. A farmer that is
working on his own, obviously had enough land and
animals that he can indeed work on his own. So all
products are the "performance of his labour". To
get people to work for him, he must have enough
productive capability in his already possessed
land & capital for them to utilize. In a one-man
farm, adding 10 people will not make an iota of
difference. Simply adding capital will not
increase it either, as that will only make the
productive process more efficient, not larger (ie,
the farmer buying an automated water spring, will
need less time to water the field, not more
workers). So in order for this farmer to utilize
extra workers, his productive capacity must be
increased, in the form of buying extra land or
switching his production to something other.

This would mean that he was consciously buying
more capital and land with the purpose of making
more profit (And as a side aspect, withholding the
same capital and land from others). But he cannot
achieve this profit on his own, he needs to get
more labour-power further than his own, in order
to get returns on the capital and land he has now
purchased. This clearly shows that capital without
the appropriate labour-power behind it is
worthless. As such, the workers hired, along with
the farmer's labour are necessary to produce the
final output. But why, and this is the sticking
point, would these workers receive anything less
than an equal share of the total output of the
farm? In short, why would there be a profit
difference between the actual surplus value they
help produce and the wages they earn. This is what
KatPoop is attempting to explain but ends up
avoiding. Even though the original farmer now
makes more sales than before he bought the capital
good & land due to increased output, and even
though he gets to keep more of those sales since
they are not split equally between all workers,
for KatPoop, "the profit has dropped". To repeat:
Even though the original farmer makes far more
money, his profits have apparently dropped.

This makes no sense.

One might make the defence that without the Farmer
buying the extra land, those workers would starve
as they would have nowhere to work. But this of
course ignores the reality that those workers
could simply work the previously unowned land that
the rich Farmer outbid them out of with the
purpose of hiring them instead as wage-workers and
giving them less than they would earn themselves.
This is incidentally the picture that Katpoop
tries to present in the rest of his argument which
is outside of the scope of this debate (and thus I
will not bother to counter), and ends up devolving
into apologetics.

But the meat of the debate, I believe lies in the
above example of the farmer. KatPoops job at this
point it to prove why the Farmer deserves the
surplus value difference between what the extra
workers produce and what they get back in return,
in other words, what I define as "profit".

First I shall counter the point raised by
KatPoop10, that I ignore the part that consumers
play in the profit. In fact I do not. It is
implied in the fact that we are talking about
getting exchange value out of commodities which
can only happen when someone purchases them.
However this only shows us that exchange value is
achieved, not how and why it is split between
wage-worker and capitalist. As such it plays no
further role in this debate.

As expected, my opponent sticks to his guns and
declines any difference at all between Artisan,
Merchant and Capitalist. I will leave it to the
audience to decide either way on who's definitions
have more relation to reality.

I would also like to counter the argument that I
am somehow appropriating the term "Capitalism"
from a Marxist definition or somesuch. In fact, I
shy away from using the term "Capitalism" at all
since it is very politically loaded and ambigous
nowadays. I prefer to use the "Capitalist Mode of
Production" which is less ambiguous (A mode of
production where the owner of the capital gets to
retain the produced commodities while the worker
gets a wage) from which we can avoid going in full
circles on wether we have "True Capitalism" or
not.
I would point out however that Capitalism has
initially been conceived as a Marxist concept,
regardless of wether or not it has been
popularized.

"However, the first use of capitalism to describe
the production system was by the German economist
Werner Sombart, in his 1902 book The Jews and
Modern Capitalism (Die Juden und das
Wirtschaftsleben)" - Wikipedia (Source 2)

Sombart was a Marxist at the time, as such, my
opponent is not justified in accusing me of
anything on this point.

Since I mentioned Marxism in this case, I might as
well point out that I am most definitely not a
Marxist, no matter what my opponent likes to
assert. Even though I agree with Marx's analysis
of the Capitalist mode of Production on *most*
points, I do not agree with everything he wrote or
with what many of his most popular followers wrote
and did. As such I would ask the audience to make
note of the cries of "Marxist! Marxist!" for what
they really are: Emotional appeals that take
attention away from his weak argumentation and
shaky definitions.


Now to actual arguments.

Re: How do I explain a company making zero profits
for a period of time

A capitalist company that makes zero profits
simply means no firm. A firm cannot sustain itself
without profits as the capitalist owner would not
be able to reinvest or sustain himself. If the
capitalist is working as well and earns a normal
"wage", then we get closer to a company where the
workers are not being exploited, although for that
to happen, all wages should be equal. If the
capitalist owner gets to earn double the amount of
any other, it simply means that he again receives
profit through exploitation but instead of
reinvesting it, he assigns it all to himself for
personal use. So in fact, producing goods within a
capitalist mode of production, *requires* that
profit will be made, or else it's not a capitalist
mode of production. It's either unsustainable or a
socialist mode of production.

RE: Not using the correct definition of profit.

KatPoop10 insists that I am somehow avoiding the
subject by not accepting his definition of profit.
But in fact I have gone to quite a length in my
second reply to show how our definitions stand
towards each other, and in fact used his own
definition to counter some of his arguments. If
this is avoiding the topic, I will leave it once
again to the audience to judge.

Re: Me conceding the debate inadvertedly.

Once again, I can do no more than leave the
audience to decide on the validity of this
statement. I will only point the argument my
opponent makes and how it seems to be missing key
elements. He makes a choice example of a
capitalist earning "profit" (he probably means
revenues here) and paying initially 800$ in wages
and thus the capitalist keeping 200$ in profit.
Then the wages are 500$ and the profit 500$ etc.
But one has to ask, how can the revenues of the
capitalist remain the same while removing workers?
This would mean that the workers were doing no
productive work (which seems strangely to be an
underlying impression that KatPoop is trying to
pass) or that less commodities are being produced.
As such, this would mean that the revenues would
probably by less than 1000$ and most likely
relevant to the number of workers laid off.

If my opponent on the other hand is simply talking
about different capitalists with different number
of workers in their industry, I really do not see
how that is any argument. My point was never that
all workers would be making the same wage within
Capitalism. Bringing different Capitalists into
the picture would only show that more
labour-intensive industries have less of a profit
margin. Not that profit does not come out of the
value the workers create. It simply means that the
worker is being exploited less.

Re: The Capitalist needs to work.

I will skip over the incredulity and accusations
of strawmen and I will counter the gist of
KatPoop's argument:

"The answer is because a capitalist has to live
and eat as well. He can't just pay workers wages
that equal the demand for the goods."

The fact that a Capitalist needs to live and eat
does not entitle the Capitalist to not working,
any more than it entitles the unemployed and lazy
to free food and shelter. If a Capitalist is part
of the productive process, along with his workers,
then he deserves an equal share of the revenue. It
is KatPoop's burden of proof to show that the
Capitalist, who _would be able to feed himself
just fine with splitting the revenue equally_
deserves a bigger share than the rest of the
workerforce. He also needs to show how this apply
to non-working capitalists.

Re: Increase in supply will not increase revenue
because demand will remain the same

This is a weird argument that I am not certain
what is trying to prove but I will nevertheless
point out why it is flawed.

We cannot assume that demand will remain the same.
In fact, we cannot expect the capitalist to invest
in further productivity is he expects the demand
to remain the same! The reason why the capitalist
invested in the first place was because he saw the
market status and concluded that there is a demand
for more products. KatPoop might argue that then
he could stay at his current supply and increase
his prices, but this would mean that the other
capitalists would outinvest him, reducing their
prices, thus increasing their market share and
driving him out of the market.

As such, Capitalists will increase the productive
capacity when they expect more profit to be made
by doing so or less by not doing so. But this does
not counter the fact that by increasing capacity
and hiring more workers, more money will be made
(or at least is expected to) while (By KatPoop's
argument) "profit" would drop. No matter what
happens. "Profit" will drop.

Again, this is nonsensical.

I see that my opponent is getting increasingly
upset about the direction this debate is going.
KatPoop, I will only remind you that a debate is
not about convincing you opponent. If that was the
idea, then we would have sticked to private
messages. It is exactly the reason because I
noticed that neither of us is budging, that I
invited you on a public debate. This way you can
see how well your argument faires to a more
neutral audience, ie an audience that does not
have an emotional attachment to the arguments on
either side. This is also the reason why I seem to
be talking to you in the 3rd person. I am not
trying to convince you. I am trying to convince
the audience, as is the case in debates.

You may think that your arguments are rock solid
and that I'm the greatest fool in the world, but
the result of this debate (if they are in my
favour) might point out to you that at the least,
your expression needs work.

I hope I've presented enough arguments to show
where profit comes from. I do not honestly think
that the arguments can progress much more from
this point but I will attempt to counter only
particular new arguments if they are posted. For
my part, I believe I have presented a solid case
on why profits originate from the labour of the
workers and not out of "existing profit" or the
"need for the capitalist to feed himself". If you
agree with this, please vote for me.

Thanks.

I will first define some relevant terms in order
to make clear my use of them. I chose these
definitions from a classical economics
perspective, in order to leave no doubt that db0
and I are not just arguing over semantics.
Hence,

“Profit” is the excess of receipts from the sale
of
products over the money costs of producing
them—over, it must be repeated, the *money costs*
of producing them.

A “capitalist” is one who buys in order
subsequently
to sell for a profit. (A capitalist is one who
makes productive expenditures.)

“Wages” are money paid in exchange for the
performance of labor—not for the products of
labor, but for the performance of labor itself.

On the basis of these definitions, it follows that
if there are merely workers producing and selling
their products, the money which they receive in
the sale of their products is not wages. “Demand
for commodities,” to quote John Stuart Mill, “is
not demand for labor.” In buying commodities, one
does not pay wages, and in selling commodities,
one does not receive wages. What one pays and
receives in the purchase and sale of commodities
is
not wages but product sales revenues.

Thus, in the precapitalist economy imagined by
Smith and Marx, all income recipients in the
process of production are workers. But the incomes
of those workers are not wages. They are, in fact,
profits. Indeed, all income earned in producing
products for sale in the precapitalist economy is
profit or “surplus-value”; no income earned in
producing products for sale in such an economy is
wages. For not only do the workers of a
precapitalist economy earn product sales revenues
rather than wages, but also those workers have
zero money costs of production to deduct from
those sales revenues.

They have zero money costs precisely because they
have not acted as capitalists. They have not
bought anything in order to make possible their
sales revenues, and thus they have no prior
outlays of money to deduct as costs from their
sales revenues. Having made no productive
expenditures, they have no money costs.

The profit-difference between sales revenues and
zero money costs of production is the full
magnitude of the sales revenues. If, for example,
one sells a product for $1,000 and has costs of
$500, resulting from previous outlays of $500 made
in order to bring in the sales revenues, then
one’s profit is $500. If one sells a product for
$1,000 and has costs of only $100, resulting from
previous outlays of only $100 made in order to
bring in the sales revenues, then one’s profit is
$900. If, going
further, one has sales of $1,000 and costs merely
of $10, resulting from previous outlays merely of
$10 to bring in the sales, then one’s profit is
$990. If, going still further, one has sales of
$1,000 and costs of just $1, resulting from
previous outlays of just $1 to bring in the sales,
then one’s profit is $999. If, finally, one’s
sales are $1,000, and one’s costs are zero,
resulting from zero previous outlays to bring in
the sales, then one’s profit is $1,000—the full
magnitude of the sales revenues.

Precisely, this last is the situation of the
workers in
Smith’s “early and rude state of society” and
under
Marx’s “simple circulation.” Those workers,
selling their commodities, not their labor, earn
sales revenues, not wages. And precisely because
they are not capitalists, and are not employed by
capitalists, there is no buying for the sake of
selling, and thus there are no money costs to
deduct from those sales revenues.

To state matters in Marxist terminology, the M of
Marx’s simple circulation is, in effect, an
M′ that has not been preceded by any M to
bring it in. This is because in the absence of
capitalists, there is no productive expenditure
and thus no such prior M. Only with capitalistic
circulation does an M appear to be deducted from
M′. Hence the full magnitude of the M of
Marx’s precapitalist, simple circulation is
profit.

Thus, in the precapitalist economy, only workers
receive incomes, and there are no capitalists and
no money capital. But all the incomes that the
workers receive are profits and none are wages. In
the precapitalist sequence C-M-C, everything is
“surplus-value”—100 percent of the sales revenues
and an infinite percentage of the zero money
capital. In the sequence of capitalistic
circulation
M-C-M′, a smaller proportion of the incomes
are “surplus-value.”

This same conclusion, that in the precapitalist
economy all income is profit, and no income is
wages, can be arrived at by way of Ricardo’s badly
misunderstood proposition that “profits rise as
wages fall and fall as wages rise.” The wages
paid in production, according to Ricardo, are paid
by capitalists, out of savings and capital, not by
consumers. If, as in the precapitalist economy,
there are no capitalists, then there are no wages
paid in production, and if there are no wages paid
in
production, the full income earned in Ricardo’s
framework must be profits.

Smith and Marx are, unfortunately, wrong about
profit. Wages are not the primary form of income
in production. Profits are. In order for wages to
exist in the production of commodities for sale,
it is first necessary that there be capitalists.
The emergence
of capitalists does not bring into existence the
phenomenon of profit, as my opponent claims.
Profit exists prior to their emergence.

The emergence of capitalists brings into
existence
the phenomena of productive expenditure, wages,
and money costs of production. Accordingly, the
profits that exist in a capitalist society are not
a deduction from what was originally wages. On
the contrary, the wages and the other money costs
are
a deduction from sales revenues—from what was
originally all profit. The effect of capitalism is
to create wages and to reduce the relative amount
of profits. The more economically capitalistic the
economy—the more the buying in order to sell
relative to the sales revenues—the higher are
wages relative to sales revenues, and the lower
are profits relative to sales revenues. Thus,
capitalists do not impoverish wage earners, but
make it possible for people to be wage earners.
For they are responsible not for the phenomenon of
profits, but for the phenomenon of wages. They are
responsible for the
very existence of wages in the production of
products for sale.

Without other people existing as capitalists, the
only way in which one could survive in connection
with the production and sale of products would be
by means of producing and selling one’s own
products, namely, as a profit earner. But to
produce and sell one’s own products, one would
have to own one’s own land, and produce or have
inherited one’s own tools and materials or the
money to buy them. Relatively few people could
survive in this way. The existence of capitalists
makes it possible for people to live by selling
their labor rather than attempting
to sell the products of their labor. Thus,
between
wage earners and capitalists there is in fact the
closest possible harmony of interests, for
capitalists create wages and the ability of people
to survive and prosper as wage earners.

And if wage earners want a larger proportion of
income in the form of wages and a smaller
proportion of income in the form of profits, they
should want a higher economic degree of
capitalism—that is, in the terminology of Marx,
more M relative to M′. For precisely this
represents productive expenditure, wages, and
costs being
higher, and profits being lower, relative to sales
revenues.

To achieve such change, what the wage earners
require is more and bigger capitalists.
Historical confirmation for the theory I am
propounding
can be found in F. A. Hayek’s "Introduction to
Capitalism and the Historians". There we find such
statements as: “The actual history of the
connection between capitalism and the rise of the
proletariat is almost the exact opposite of that
which these theories of the expropriation of the
masses suggest. . . . The proletariat which
capitalism can be said to have ‘created’ was thus
not a proportion of the population which would
have existed without it and which it degraded to a
lower level; it was an additional population which
was enabled to grow up by the new opportunities
for employment which capitalism provided.”

A further validation of the fact that profits are
the original source of income, and are actually
decreased when an economy becomes more capitalist,
is the fact that modern economies have lower
nominal rates of profit than developing or
non-developed economies. This is precisely due to
the fact that there are less productive
expenditures relative to sales revenues. The less
productive expenditures there are relative to
sales revenues, the lower are costs relative to
those same sales revenues. The result is a higher
rate of profit.

In summary, while my opponent is approaching this
debate of how profits arise from a Marxian
exploitation perspective, i.e. that profit income
only arises at the outset of capitalist
production, I am approaching this debate from a
more logical and rational perspective, i.e. that
since profit is an income that is earned when a
seller sells products for money revenues that
exceed the seller's money costs, the result that
undeniably follows is that the onset of capitalism
was the onset of a decrease in the nominal rate of
profit earned by sellers of products. This means
that profits are not a "surplus value" that is
deducted from what would have been all wages.
Wages are a money cost, and therefore wages
decrease what would have been all profit income.

Why is it "absurd" to consider the fact that there
existed capitalist *individuals* for many years
before capitalism became sanctioned and accepted
as an entire system by either a government or a
population? One individual who changes from one
particular role to another does not mean imply
that the entire economy has changed. A socialist
company can exist in a capitalist system, and a
capitalist company can exist in a socialist system
(provided of course he is not discovered by the
socialist authorities). A capitalist is, and you
admit this, one who owns and controls a set of
means of production with the intention of making a
profit. Clearly, a merchant does not merely "buy
cheap and sell dear". A merchant earns an income
by owning and controlling his capital goods, i.e.
his shop, his materials, and his tools in such a
way to produce and make ready a supply of finished
goods for sale. If he expanded any money for
these capital goods, then he incurs a money cost
that he must deduct from any sales revenues he
makes. The difference is his net income, or, his
profit.

Then db0 goes on to make the arbitrary claim that
an artisan is somehow fundamentally different from
what he calls a capitalist, because the artisan
incurs a cost in sustaining his life and allowing
himself to be productive. He states that although
these money costs are not direct monetary costs in
producing the products, they are nonetheless money
costs that the seller incurs.

The problem with this argument is that the
requirement that the artisan incurs monetary costs
in feeding himself *is no less true for (what db0
calls) the capitalist*. A capitalist is a human
too, and the last time I checked, he too needs to
incur costs to sustain and allow himself to be
productive.

So the artisan in db0's example is in fact a
capitalist. The key component of being a
capitalist is buying *for the purpose of making
subsequent sales*. A person needs food in order
to survive. A person who sells his labor does not
sell his labor in order to make subsequent sales.
He sells his labor so that he can eat and clothe
himself. A capitalist earns his income by earning
profits, which is the net income he makes after
deducting the money costs that are incurred for
the purpose of making subsequent sales from his
sales revenues.

A small artisan who incurs money costs by buying
capital goods has to deduct those costs from his
subsequent sales revenues. His profit is the
difference between the money costs of producing
the goods and the sales revenues from selling
those goods.

I suspect that db0 is arbitrarily separating
artisans from what he calls capitalists so that
his anti-capitalist agenda doesn't include these
small business owners. If he were fully
anti-capitalist, he would have to be against any
private ownership of any means of production in
all its forms. An artisan who buys materials and
owns a shop thus becomes an owner of some means of
production, and therefore must be treated with the
same contempt as what he calls a capitalist.

Regarding wages, db0 states: "But what IS the
performance of labor if not its product [sic]?".
Here db0 makes the mistake of conflating labor
with products. What db0 fails to grasp is that
labor and products are completely separate
entities. He asks what else but the end product
can define labor? The answer is *the labor that
is performed itself*. Labor is a means to achieve
an end, and the end is the money that the laborer
seeks to earn. The value of this labor is the
wages that are paid, not the products that the
labor helps to produce. The capitalist also helps
in the production of the products, and his income
is the money that is left over after paying the
wages and capital goods, not the products
themselves.

In other words, db0 is claiming that since labor
and products are connected in some way, that they
somehow become one and the same. This claim
violates Aristotle's "law of identity", which is a
law that states that two separate and distinct
entities must not be treated as the same entity.
Labor is not product. Labor is a *means* that,
along with other means, helps the capitalist
produce *his* products, which is an *end* for the
capitalist. The performance of labor is not the
products it helps produce, but the act of labor
itself.

Now that db0's initial errors have been corrected,
let us correct his errors that he makes in his
"actual arguments" section.

When talking about a pre-capitalist economy, db0
drops the context under discussion, and moves to a
different economy. He claims that workers in a
pre-capitalist economy allegedly did have money
costs. For example, he claims that an artisan
incurs money costs when he buys capital goods.
This claim not only refutes his earlier contention
that the only money costs an artisan incurs are
the costs of sustaining his life, this claim also
implies that we are not talking about a
*pre*-capitalist society anymore. A
*pre*-capitalist society is a society that existed
*before* capitalist profit was a predominant
source of income. An artisan that incurs money
costs with the intention of making subsequent
sales is, contrary to what db0 claims, a full
fledged capitalist. The artisan becomes a
capitalist when he comes into ownership and
control of the means of production through paying
money for them with the intention of making
subsequent sales, and capital goods are a means of
production and the artisan intends to make
subsequent sales!

A *pre*-capitalist society is one where the
predominant method of earning an income is by not
making any productive expenditures and just
earning sales revenues. For example, a society
that is predominantly made up of self-sufficient
farmers who incur zero money costs, is an example
of a pre-capitalist society. Self-sufficient
farmers can produce crops and sustain themselves
without incurring any money costs whatsoever, and
only earning sales revenues. For example, the
crop reaped in one year provides enough food and
self-replacing crop-seed to sustain the farmers
and produce crops for sale to buyers. The farmers
can do this every year and incur zero money costs
and yet still earn money revenues by selling their
produce. This is an example of a pre-capitalist
society. Furthermore, if one looks at the incomes
that are being earned by the farmers, one can
immediately see that the farmers are earning
product sales revenues. Their product is their
crops, and their buyers are paying the farmer
money to buy their crops, not their labor. The
farmers are not selling their labor to the buyers
of their crops. The farmers are selling their
crops, and product sales earn the sellers product
sales revenues, not wages. And, what is important
for our discussion, since the farmers incur zero
money costs of production, their income is the
full magnitude of their sales revenues, and hence
their profit is 100% of their sales revenues.
Their entire revenue stream is all profit because
whatever money they do earn in selling their
products, they deduct zero money costs from those
sales revenues. They deduct zero money costs from
their sales revenues because they made zero money
expenditures in the past with the intention of
making subsequent sales. The farmers have not
paid any wages to anyone, and nobody paid any
wages to the farmers. The buyers of the farmer's
products are not paying him wages, they are paying
him product sales revenues. This is because the
farmers are not on putting their labor on the
market, they are putting their products on the
market. Since the farmers are still earning an
income in selling their products, it follows that
their income is profit income, not wage income.

Therefore, this reinforced my initial argument
that the original income in primitive society is
profit income, not wage income.

It wasn't until these self-sufficient farmers
began to make productive expenditures in money,
did capital goods expenditures and wages arise in
society. A primitive farmer that incurs zero
money costs in selling his products earns 100%
profit. A farmer that pays money to buy capital
goods will earn less than 100% profit, no matter
how high his revenues become. This is because
whatever his sales revenues he does earn, he must
deduct a positive amount of money from those sales
revenues in the form of depreciation costs, in
order to calculate his net money income. The rate
of profit he earns thus falls. If, going a little
further, our farmer buys some labor to help on the
farm, say feeding the chickens and pigs, then the
rate of profit that our farmer earns is decreased
even more, because now he has to deduct those
wages as a cost from his gross profit income,
because remember, our farmer is still selling
products, not labor, and so the income he earns is
product sales revenues. He is not earning a wage
in selling his goods, because the buyers aren't
buying his labor, they are buying his products,
and thus our farmer is still earning product sales
revenues. The only difference between the
pre-capitalist society and now is that now he has
to deduct money costs from his sales revenues.
Instead of being all profit, his income now drops
to less than 100% profit. His profit income falls
because he has to deduct wage costs and capital
goods costs from his revenues.

The demand for commodities does not lead to a
demand for labor, because demand is always
expressed in terms of money. If we look at the
pre-capitalist economy, the only demand that
exists, in money terms, is the money demand for
the products of the farmers. There is no other
monetary demand for anything else. If there is
only a monetary demand for finished products, and
nothing else, then there cannot possibly be any
wages or capital goods, because in order for there
to be wages and capital goods, there has to be a
monetary demand for them. A pre-capitalist
society has no monetary demand for wages nor for
capital goods. The only monetary demand is for
consumption.

It therefore follows that wages only arose once
people made a monetary demand for just labor as it
is. Once farmers began to make a monetary demand
for things other than just consumption goods, with
the intention of making subsequent sales, for
example demanding labor, only THEN did wages and
capital goods come about in society.

Since the income in pre-capitalist societies is
all profit, it follows that the rate of profit
falls once an economy become capitalist. For then
productive expenditures are made, and these
expenditures must be deducted as costs from sales
revenues. The more capitalist an economy gets,
the more productive expenditures are made relative
to sales revenues. This means, quite surprising
to most people, that the more capitalistic an
economy becomes, the lower the rate of profit will
be.

This claim has empirical validity. It is well
known by economists that developing economies have
a higher rate of profit than developed economies.
This is because in developing economies, there are
less productive expenditures made relative to
sales revenues, and this results in a larger rate
of profit. In developed economies, there are much
more productive expenditures made relative to
sales revenues, and therefore the rate of profit
is lower. If ever there was a signal of a
declining economy, it is a rapidly growing rate of
profit. This is because the less productive
expenditures that are made, the lower wage rates
will be relative to consumer prices.

If wage earners want to earn more wages and have
more purchasing power, the best way to get it is
to have more and larger capitalists, i.e. more and
larger numbers of people who make productive
expenditures. The more people that do this, the
more rich will wage earners become. This is why
wage earners in the US are more prosperous than
wage earners in developing economies. It is
because the capitalists in those countries are
smaller and less numerous.

Finally, I will correct db0's error regarding the
$100 widget and his idle capital claim, and his
claim that wage earners shouldn't "thank" the
capitalists, because they allegedly could do
better in selling products to earn an income.

Even though the same amount of effort by a
capitalist using two different quantities of
capital can result in two different amounts of
profit, it does not follow that this means that
the capital itself is producing the profit. While
db0 is correct that all capital requires human
action in order for it to enable a profit to be
earned, he is not correct that the only labor that
can attributed to producing the products are the
manual laborers. The capitalists provide an
indispensible function in the production of goods,
namely they provide intellectual direction of the
whole production process. They have to determine
what materials to buy, where, for what price, from
whom to buy them, they have to find out what the
consumer might want in the future, the capitalist
has to decide where to produce the goods, and the
correct prices for every single input in the
company. This is, without a shadow of a doubt,
not only invaluable and required, but it is almost
certainly a full time job. A capitalist must
devote many hours per week, and in many cases
laying awake at night, trying to figure out what
the consumer wants in the future, and what price
they are willing to pay.

While there are many manual laborers who certainly
have the capability to do all this, what cannot be
denied for romantic reasons is that there just
isn't enough *time* to do both manual work and
intellectual work, and serve the customer in
better ways than the competition. If a company
separates the intellectual tasks from the manual
tasks, and it performs better in the marketplace
at satisfying customer desires than companies that
don't separate these tasks, then all this means is
that the consumer is essentially telling the
socialist company to separate the tasks so that
they can each be performed at a higher level.
This is not to say that all socialist companies
MUST fail, or that they SHOULD fail, all I allege
is that the principle that the division of labor
makes for a more productive economy is true at the
macro-economic level, for example if two people
are making bread and clothes, they can both have
more of both if they each focus on one task and
then trade with each other. This is the law of
comparative advantage that David Ricardo
discovered more than 200 years ago. This is the
basis for how even poor countries can take part in
the division of labor and contribute. Now, this
principle of comparative advantage between
companies and economies is no less true *within*
companies. If tasks are separated within
companies, then the company becomes more
productive overall. Please note that I realize
that there is literature that exists that shows
declining gains to be made from separating tasks
to continually higher degrees, but this does not
refute the principle that dividing tasks in
general makes a company more productive. Can you
imagine how productive someone could be if they
did both manual labor on the assembly line as well
as doing the company's accounting? Or how
ineffective a capitalist would be in directing a
company if he had to also sort the mail? The
principle of dividing tasks to make the company
more productive is the premise behind separating
intellectual from manual labor. This does not
mean the capitalists are now not contributing
anything and are just sitting around twiddling
their thumbs. It means that their labor is of a
different nature than the manual laborers.

In summary, I have reiterated the fact that
profits are the original source of income in
society, not wages, and that wage incomes only
came about once people started to make productive
expenditures in money, with the intention of
making subsequent sales. It was only then that
the full profit incomes decreased from 100% of
sales revenues to only a fraction. In fact, in
the US, the fraction of productive expenditures
relative to sales revenues is so high, that there
is far more wage income than profit income in the
economy. Profit income represents only around 10%
to 15%, whereas wage incomes comprise a far
greater percentage. The most significant cost for
the average business is wage costs. The reason
wages are so much higher in the US compared to
developing countries is because US citizens make
far more productive expenditures relative to total
sales revenues. The US is more capital intensive,
which means there are more money outlays for the
purpose of making subsequent sales. The larger
this fraction becomes, the better it is for the
wage earners.

While db0 wants to appear righteous in biting the
hand that feeds him, he must realize that it is in
the interests of those who can't sell products to
earn an income, to have all the opportunity in the
world to be able to offer just their labor and
still make money. The rise of the capitalist
class enabled a rise in the population who could
not earn an income in any other way.

I can only speak for myself, and I know that if I
could not earn an income by selling my labor, if I
had to find a way to produce goods and sell them
to make money, I would definitely have a much
lower standard of living than I do now. Much
lower indeed. However, this is not true for
everyone. Some people are able to find ways to
rise up from the wage earning class and find
financing to help them produce products and earn a
profit income. From my perspective, the more
people there are that do this, the easier it is
for me to find a source of income. That means
that capitalists and wage earners have a
harmonious relationship. The capitalist wants
labor, and is willing to pay money for it. The
laborer wants money, and is willing to offer their
labor for it. How in the world can anyone
disparage such a benevolent and mutually
advantageous state of affairs?

I see that in db0's third post, he has made many
misrepresentations of what I said, which is
understandable considering how he has to translate
all economic arguments into Marxian ideology. He
is also starting to *solely* talk about another
topic entirely, namely, the nature of the
capitalist-worker relationship. The capitalist
worker relationship is not the only relationship
that exists. There is also the
capitalist-customer relationship. In this
relationship, the customer dictates and directs
the capitalist. db0 ignores this relationship,
even though he has to explain monetary profits.
Since customers are the ones paying revenues for
the products, where are they in db0's arguments?
NOWHERE. He doesn't at all mention customers. He
focuses entirely on capitalists and the workers at
*his* company. He doesn't at all mention the
workers at other companies who direct the first
capitalist in what to produce.

Now, as for his latest post of nonsense, I have to
correct him yet again. I never defined a
capitalist as anyone who ever used means of
production, as you claimed. As I made clear in my
very first post, a capitalist is a person who
expends money with the intention of making
subsequent sales. Doing so makes him an owner of
means of production. It is clear that db0 cannot
accept this, which is why he resorts to using the
word "apparently", and "practically". It is to
avoid the substances of my statements and change
them into something else, and then from there he
provides counter-arguments. How about he debate
what I am saying rather than what I am not saying?
That's the least he can do.

db0 claims that I deny the fact that
pre-capitalist societies had artisans. As I made
clear in my second post, I made it a point that
since capitalists are those who buy using money
for the purpose of making subsequent sales in
money, it follows that this role can and
absolutely did exist in "pre-capitalist"
societies. But why do we call these societies
"pre-capitalist" then? We call them
pre-capitalist because the capitalist role was not
wide-spread nor was capitalist property recognized
in law. Artisans who bought means of production
using money and sold products in money were not
widespread in pre-capitalist times. Adam Smith
referred to an "early and rude state of society"
in the centuries before his time. It was during
this time, where *most* people were not capitalist
artisans, but self-sufficient farmers and
artisans, did the pre-capitalist era take place.

db0 claims that pre-capitalist society is one that
has an existence of capitalists, but on "who
exerted the rule and which is the primary mode of
production in society". This is not an answer.
It is a contingent statement. WHO are the "who"?
WHICH is the "which"? You can't define something
by merely saying "it depends". You have to define
it. db0 fails to define his words because he is
afraid of getting caught making even more errors.
I am not afraid to define the words I am using,
but it seems like db0 doesn't define his words.
This is a common tactic to make readers think they
agree with the writer.

So what arguments does db0 use to show the alleged
difference between an artisan and a capitalist?
Well, first of all, do you see that he CONNECTS
the two roles farmer and artisan into one entity
called THE "Artisan/Farmer"? I made it clear that
a self-sufficient farmer is not a capitalist
artisan. Does this mean that a farmer cannot be a
capitalist? Of course not. You can observe a
capitalist farmer, if the farmer makes productive
expenditures in money with the intention of making
subsequent sales in money. An artisan can be
self-sufficient and never make any productive
expenditures in money, and thus only earn money
revenues. If he did that, he is not a capitalist
artisan. He is a seller of his own hand made
goods. All his income is 100% profit, because in
terms of money, he made no money expenditures, he
only made money revenues. If he made productive
expenditures in money, then his profit would
decrease down from 100% toward whatever the
difference is between his revenues and costs.

db0 claims that the difference between an artisan
and a capitalist (as if an artisan can never be a
capitalist), is that whereas artisans "use their
own tools and labour to create products, which
they either use themselves or sell for income",
capitalists are those who "makes other people
(wage workers) use the tools they own (Capital) to
create products for them which they sell for
profit."

But what db0 fails again to see right in front of
his eyes is that the income the artisan earns is
profit income! For the artisan is selling his
goods, which means he earns product sales
revenues. Profit is always earned on sales
revenues, not wages.

If the artisan made all the tools himself from
scratch, and made no money outlays for them with
the intention of making subsequent sales, then his
income is all profit.

Remember, our debate is on explaining profits in
the economy. If profits exist somewhere, it has
to be included in explaining aggregate profits in
the economy. Our debate is not on explaining the
nature of capitalism per se, it is on explaining
profits.

I find it highly disturbing that db0 insists on
using a definition of capitalism that no
dictionary uses. He is trying to use Marx's
*treatment* of a typical capitalist production
process as THE definition for what capitalism is
general. That is dishonest because we already
have a definition of capitalism, and it is private
ownership of the means of production.

db0 repeatedly wants people to believe that
profits only exist with capitalist production that
uses paid labor. It doesn't. Not at all.
Profits are the difference between product sales
revenues in money and costs in money. If you sell
anything for money revenues, then your profit as a
percentage of your sales revenues will be anywhere
between 100% and negative infinity. If you
incurred zero money costs, then your sales
revenues are 100% profit. If you incurred money
costs, then your money profit falls by those money
costs.

What db0 is trying to do is introduce all sorts of
Marxist ideas that have no relevance whatsoever on
money profits, money costs, and money revenues.
He is trying to introduce physical wealth into
this discussion in his attempt to explain a
*monetary* phenomena. He can't do that. This
whole debate is on aggregate money profits, which
is a monetary phenomena.

Producing goods does not guarantee a profit will
be made. What if a company has been earning zero
profits for a short time, lets say a couple years.
How can you possibly focus on production if you
are to explain this monetary phenomena? Where is
the "surplus value"? If the capitalist owners are
earning zero income, but the wage earners are
still earning money, would the Marxist claim that
the wage earners exploiting the owners?

The point is that if you sell goods for money and
you incur no money costs of production, because
you made the means of production yourself from
scratch, if you are a self-sufficient artisan or
farmer, your entire sales revenues are all profit.
db0 wants to ignore this fact and divert
attention away towards a debate on anything but
this fact. He believes that costs can also be
described as the physical material that goes into
making consumer goods. These are not money costs.
In order to explain *money* profits, we have to
explain *money* costs and *money* revenues.

All consumer goods require materials to go into
them. This however is irrelevant. In isolated
cases like this we do not have enough information
to explain why there are money profits in the
economy. That is the ultimate debating topic. If
you explain anything in a debate, all your
statements have to connect somehow with that
debate topic. If they don't, you are just wasting
your time.

As a side note, db0 is the one who created the
headline title called "Theory of Profit: Where
does it originate within a Capitalist economy?",
without even consulting me. I didn't say this
before, but I will now:

Profits do not originate in a capitalist economy!
They were the original source of income for those
who sold products entirely made by hand. For,
what is this, the fifth time? If you sell goods
for money, then the income you earn is product
sales revenues. You do not earn wages. Wages are
paid for labor only. If you make consumer goods
from scratch yourself, and you sell these goods to
people, then these people are not buying your
labor. They are buying your products. You
therefore earn product sales revenues. Since you
incurred no money costs in producing the goods for
sale, your revenue income is all profit.

I don't know how many times I have to repeat this
before db0 accepts this key fact. It seems as
though every time I say it, he hums and hahs and
then immediately talks about something else.

db0 keeps insisting that labor and products are
identical, for the sole reason that products
require labor. This is, as I said, a VIOLATION of
logic. You can't just equate two separate
entities simply because doing so makes your case
more plausible. I don't think anyone who thinks
about it for more than a few moments will conclude
that labor and products are the same thing. T+ I
never denied the fact that there is "an undeniable
connection between them". But I do not make the
mistake of concluding that a connection means they
are the same. I see that db0 finally admitted
that they are not the same, after claiming they
were. That is an improvement. Since they are not
the same, and someone were to buy either of them
for money, then the different entities that are
being sold must be earning two different incomes.
One income is money paid for labor, and the other
income is money paid for products.

Income earned in selling products is product sales
revenues. Income earned in selling labor is
wages. Since profits can only be earned on the
basis of making sales revenues, it follows that a
primitive artisan who sells goods must be making
all profit.

db0 also incorrectly claims that the performance
of labor is wages. The performance of labor is
not wages. The *payment* for labor is wages. The
performance of labor is just another way of saying
labor performed. Labor performed is just another
way of saying the actions that were made in one's
productive quest of earning an income. Buying and
selling stock are human actions no less than
welding two pieces of metal together. Buying and
selling stocks is performing labor.

Finally, after reading db0's third post a little
further, I see that he has inadvertently conceded
the debate to me.

He has changed his position and now admits that
the income that the pre-capitalist farmers and
artisans were earning was not wages at all! This
is a radical change from his original stance that
they were wages. This is a good thing for db0,
because he is starting to wake up his mind a
little bit. Let's see if he can wake it up a
little more.

So the income the pre-capitalist artisan were not
wages. Good. But what's this? It was not
profits either? It is just "income"? Sorry db0,
you have just failed and inadvertently conceded
the debate to me. I can prove how by simply
showing you what I already showed before:

If a capitalist pays out $800 in wages and sells
products for $1000, then, assuming no capital
goods costs, his profit is $200. If he pays out
$500 in wages and sells goods for $1000, then his
profit becomes $500. If, going further, wages are
$400, then his profit is $600.

As can be seen, the limiting case is that his
business earns $1000 in profit if his wage costs
are zero. He earns $1000 in profit because he
deducts zero money costs from his product sales
revenues. This was the case in pre-capitalist
times. In pre-capitalist times, no money outlays
were made before people sold their products.
There product sales revenues thus earned them 100%
profit.

db0's admission that wages are not paid in selling
goods, but product sales revenues, forces him to
concede this debate that profits are in fact the
original source of income, because profits are
earned on product sales revenues.

But, even though he has already lost this debate,
I will nonetheless continue correcting his further
errors, because I only agreed to this debate so
that he would learn, not so that I can "win".

db0 talks about the case of an artisan who incurs
money costs in buying capital goods and thus earn
less than 100% profit. He states:

"If profit as KatPoop defines it is simply all
income that comes from sales, then this too will
be a 100% percent
profit. The farmer will simply be more productive
with his new capital and produce more which will
soon make up the cost of the capital
expenditure."

This statement makes a NUMBER of errors. For one,
it makes the classic economic fallacy of equating
money profits with physical productivity, as well
as making the mistake of assuming that more
capital goods increases money costs. Not to
mention the error that profits can EVER be 100% of
you incur money costs of production. If you incur
just $0.01 in costs, your profit will be less than
100% of your sales revenues. db0 makes a classic
reference point fallacy. He is assuming that as
long as a business can increase its nominal
profits to be the same as it was earning before
the capital goods purchases, then profits are
100%. WRONG. The 100% of the revenue number is
always whatever the most current revenues are. If
a person or firm incurs ANY money costs in its
production, then the profit is less than 100%,
because CURRENT profit is the profit made after
deducting costs from CURRENT revenues. Profit is
a difference. It is the difference between
revenues and costs. If you incur costs, your
profit can NEVER be 100% of your revenues. EVER.

Another error he makes is about money costs on
account of capital goods. A firm can spend the
same amount of money on capital goods and yet
employ more of them, if the price for the capital
goods falls. Furthermore, a firm that becomes
more productive does not necessarily earn more
revenues and hence more profit. This would only
occur if there is a *growing* demand for its
products. But what happens if the demand stays
the same? If the demand stays the same, then more
production will make selling prices fall, not
rise. Profits do not have to rise if more is
produced. This principle is what underlies the
reason why the prices of electronics tend to fall
each year. They tend to fall because of more
being produced and sold. It is not guaranteed
that more capital goods will result in more
profit.

Moving on, yet more errors and misrepresentation.
db0 claims that the way I introduced my example of
a farmer who hires some workers implies that I
think that the work of the workers is "not really
necessary". How in the world can I think that?
If the farmer hires some workers, then by
definition the farmer (and I because it's my
example) think that the workers labor is
"necessary" to the farmer! Talk about the biggest
straw man ever. And db0 claims I thus made a
"fatal mistake"? Well, good thing I never said
that, because it would be a mistake to conclude
that!

db0 then goes on about an example of a farmer
hiring workers, and what is "obviously" true and
"clear".

I agree with most of it, up until his so-called
"sticking point". He states:

"As such, the workers hired, along with the
farmer's labour are necessary to produce the final
output. But why, and this is the sticking point,
would these workers receive anything less than an
equal share of the total output of the farm? In
short, why would there be a profit
difference between the actual surplus value they
help produce and the wages they earn.

The question you should be asking is, "Why don't
COMPETING capitalists, in the pursuit of profit,
bid up the prices of the factors of production to
just under their selling prices? Why doesn't a
capitalist, who sees that he can make a positive
profit if he outbids another capitalist for labor
and capital goods to prices above where they
currently yield 5% say, to prices where it will
earn him 4.9%? Why is there always a positive
difference? Are capitalists all colluding to keep
the prices for factors lower than what they
"should be"?

The answer is because a capitalist has to live and
eat as well. He can't just pay workers wages that
equal the demand for the goods.

db0 goes on:

This is what KatPoop is attempting to explain but
ends up avoiding. Even though the original farmer
now makes more sales than before he bought the
capital good & land due to increased output, and
even though he gets to keep more of those sales
since they are not split equally between all
workers, for KatPoop, "the profit has dropped". To
repeat: Even though the original farmer makes far
more money, his profits have apparently dropped."

See the straw man? I never said that revenues
always rise. In the aggregate, demand is fixed by
whatever money *exists*, let alone what can be
spent. I already showed that demand doesn't
always rise when productivity increases. The
reality is that prices actually tend to FALL when
productivity rises.

I hope it is clear by now that db0 seems to have
to set up straw man arguments in order to win. He
is not listening to what I am saying. He is
listening to what he PERCEIVES me to be saying.
He is doing this because he is trying so
desperately at painting me as some greedy
capitalist apologist. He does this for the same
reason all Marxists do it. He only thinks in
terms of class. He has to mentally force me into
a class and then he debates me. He really
debating me, he is arguing against his demons.
That's why he is talking over me the whole time.
"Katpoop seems to be saying", "katpoop is
implying", "katpoop is attempting to say",
"katpoop must believe that", etc etc. Instead of
reading my words, and treating me an individual,
he is not arguing against me, but someone else.

To conclude this post, and debate, db0's final
statement shows that he really isn't at all
concerned with profits and how they form in
society (selling goods BY ANY MEANS), he is more
concerned with trying to figure out why there
seems to be such wealth disparity in society, why
humans have gotten to this point of incredible
riches for some and incredible poverty for others.
He thinks he has found the answer in Marx's
exploitation theory, because the theory seems to
make (superficial) sense to him.

I have seen this many times before in people. I
have seen disenfranchised youth who want to rebel
against perceived injustices such as wealth
inequality. Then he found Marx's manifestos. To
him, it seemed like the most revealing and
enlightening intellectual experience he has ever
had. For now he had a whole intellectual
framework that offered him emotional condolences
and intellectual justification on why he himself
was not rich. It must be the "system" he thinks,
it has to be the system. There just has to be a
systematic, institutional reason for why some
people earn way more than others. AHA! It has to
the capitalist system. The capitalist system has
to be the reason because profits only exist in
capitalism. In societies other than capitalist
ones, profits don't exist, and everyone makes
"income" only. And wouldn't you know it, Marx
said that your income will be even as high as the
revenues that are made! Yeehaw! Sign me up, I am
on board with that. Not only can I make more
money, I can piss off those greedy asshole
capitalists in the process! This almost seems too
good to be true!

I truly hope that one day he begins to open up
other texts besides Das Kapital. I read it too,
but I also read other books. It was only after I
read classical economics and Austrian economics,
did I realize the errors of Marx's framework. I
didn't reject Marx on emotional grounds, I
rejected it on logical grounds. Marx's framework
is not logical. There is a reason why it failed
on its own after it was put into practice.

db0 says that my job is to explain why the farmer
deserves the "surplus value" difference between
what the extra workers produce and what they get
back in return.

The answer is that the question is loaded, and he
knows it. The fact that he needs to get into his
head is that the extra workers are NOT the ones
who "produce" the products. The CAPITALIST
"produces" the products. The workers HELP him do
it. It is not true that all that is required to
be a producer is to be told what to do, how to do
it, when to do it, and where to do it. There has
to be someone who thinks about and decides what to
produce, how to produce it, when to produce it,
and where to produce them.

All productive action must be guided by reason.

Your question "why does the farmer "deserve" the
surplus value" can be answered by asking the
customers why they are paying a high enough price
such that gives the capitalist a profit after he
spent money for wages and capital goods. Why do
customers do that? Why don't customers only buy
from companies that pay the capitalists zero
profits? Why don't they abstain from consuming a
capitalist's goods until the capitalist lowers his
price? Is it because they have to live and eat
and so they are forced to buy consumer goods?
Yes? Well, that is also true for the capitalist.
A capitalist has to eat and enjoy life too, and
this forces the capitalist to extract cash from
his company in the form of dividends and draw
payments.

If we imagine the farmer again, and ask why he
doesn't pay more wages, then let us try using the
Socratic method to see what would happen *if* the
capitalist did in fact pay workers more, and see
what would happen to aggregate profit in the
economy.

Thus suppose our farmer pays the workers more
money wages. Suppose he pays them everything he
has except the money he needs to survive. I am
sure that you agree that the capitalist has to eat
in order to live. So let us suppose that all
capitalists did pay their workers as much as they
can such that the workers make everything except
that which keeps the capitalist alive and able to
come to work.

Will aggregate profit exist? Yes, it would. This
is because in order to eat, the capitalists have
to extract money out of the company. The money
that capitalists use to buy food is from the money
they extract out of the company's cash balance.
Is this money a productive expenditure for the
business? No, it is not. It is not a money
*outlay* that is later become a reported cost to
the capitalist. It is simply a net decrease in
the firm's capital value.

However, this money that the capitalist extracts
is, so far, neither a revenue for anyone nor a
cost for anyone. Since it is neither a cost nor a
revenue just yet, at this point it has not
affected profits. It can't. Profit is revenues
minus costs, and if an action affects neither
revenues nor costs, it can't affect profits.

Now, consider the effects of the the farmer
capitalist spending the money on food. This
action DOES have an effect on aggregate profit,
because it affects a company's revenues somewhere.
Thus we have just identified a source of
aggregate profit. Even if a capitalist consumes
just enough to keep himself alive, and the wage
earners make most of the incomes, and they only
accept the capitalist because he provides a
service to the company, the fact that the
capitalist's consumption creates a difference
between aggregate revenues and aggregate costs
means that aggregate profits have to remain
positive.

If the capitalist dies because of starvation, and
the workers take ownership of the farm, then they
are going to have to make money outlays if they
want to keep the farm in operation. Since the
workers make money outlays, then they will have to
deduct these outlays from their revenues in order
to calculate their income, and guess what? We are
right back to where we started. Now the workers
are making profit incomes, because they are no
longer selling their labor to anyone, they are now
selling just their products. Since they are
selling just their products, they make product
sales revenues. Since they are also making money
outlays for materials and machinery, they must
deduct these costs from their revenues, and the
difference is their profit.

This is why a worker's "revolution" cannot
eliminate profit. As long as goods are sold,
product revenues are earned and will thus
represent gross profit income, not wage income.
As long as money costs are incurred in the
process, the rate of profit will decrease.

I hope we are done now, because I am honestly
getting tired having to see how many errors you
keep making, and the number of misrepresentations
you make of my statements. I am just here to
teach you in all honesty. I only agreed to this
debate because I never give up on my students.

1. A firm can make zero profits and is still a
firm. If a firm has $1 billion in assets, then
the capitalist can earn zero profits for 20 years
by selling $50,000 worth of assets each year. He
will probably make less revenues each year, but
his costs will decrease as well because his
depreciation costs will decrease.

2. Money Profits = Money Revenues - Money Costs.
If you don't want to use this definition, then by
all means continue to be wrong. I don't think
anyone here will use any other definition than
this one.

3. A firm can lay off workers and still make the
same and even growing revenues. It can fire a
worker and save on wage costs, and buy a machine
to do the work of the fired worker. This happens
all the time. Revenues don't have to fall if
workers are laid off. I know this fact upsets
you, but it's the truth. Therefore, my example of
considering a firm that makes $1000 while having
successively lower wage costs, will make more and
more profits. Using standard limit analysis, the
stopping point is when profits become equal to
sales revenues. This state of affairs, of having
revenues but no money costs, is what characterized
pre-capitalist society. Workers sold products,
and earned product sales revenues. But they
incurred no money costs, and so their sales
revenues was all profit.

4. A capitalist works. If you define work as only
the work done by wage earners, then what did
people do in their business before there were
wages? In pre-capitalist societies when the only
income was profit? Did the workers not work then?
What if a capitalist performs some manual labor
as they all do now in fact? Is he earning a wage
or is he still earning a profit? You really want
me to believe that a capitalist performs no work?
I'm not a Marxist.

5. If you consider the economy in the aggregate,
where the total supply of money becomes a finite
number, then you can see that total demand must be
finite at any one time. Because of this, any
change in supply for one firm that does succeed in
earning the firm more revenues, must be matched by
an equivalent *fall* in revenues elsewhere in the
economy. Since aggregate revenues stayed the
same, and since there was no decrease in aggregate
costs, it follows that aggregate profits must be
the same. For the economy as a whole, an increase
in supply does not at all cause an increase in
demand. The only way total demand and thus total
revenues can rise if there is a rise in the total
quantity of money. The central bank is in charge
of that, not corporations, and certainly not
capitalists. What you need to understand is that
when the central bank "prints money" (euphemism),
what happens to the aggregate factors? Well,
since creating more money increases total
spending, it must increase total revenues almost
immediately. However, it doesn't increase total
costs immediately because costs are a reflection
of *past* spending, for example the wage costs and
capital goods costs that are reported in the
current period are a reflection of the prices paid
in the past, not the prices paid now. Therefore,
this inflation of the money supply increase
aggregate profits. If you go to wikipedia and
search for M3 money supply (which is a measure of
total money printing) here:
http://upload.wikimedia.org/wikipedia/en/9/95/Comp
onents_of_the_United_States_money_supply2.svg, you
will see how much money the Federal Reserve has
been creating since about 1960. Notice how it has
accelerated the rate of money creation. This has
accelerated the increase in profits in the
economy. The more and faster it prints, the
higher profits will become. The capitalists in
the economy have absolutely no control over this
process, and therefore it is incorrect and vicious
to accuse capitalists of "exploiting the wage
earners" more and more, especially in the last
10-15 years, when the rate of money creation has
rapidly accelerated. The reason why profits are
so incredibly high in the economy is because of
this process of money creation. Creating money,
once it enters the broader economy, increases
profits across the board. This is why almost
everything seems to always go up in price (not
including the recent collapse of course). The
more money that is created, the higher prices
become, and the higher the profits earned. THIS
is the answer to your concern of why capitalists
are making what seems to be absurdly high incomes.
They are making such high incomes because
inflating the money supply increases profits much
more than it increases wages. This is because,
like I said, inflation hits revenues immediately,
but affects costs (like wage costs) only with a
time lag. This is why profits keep going higher.
It isn't because the capitalists are succeeding in
getting more money from the wage earners by
lowering their wages. It is because the
capitalists revenues keep rising in the aggregate
due to the Federal Reserve printing money all the
time.

6. Finally, I see what kind of man you are,
pleading to get votes. Where is your integrity?
Where is your sense of self-respect? Why are you
groveling like this, begging to get votes? Votes
shouldn't matter to you. The truth should be the
most important thing that you seek, not validation
from random people. Sheesh.

PS, I will say this again, because you seem to
ignore or forget important points I make: If you
make a 5th post, so will I. Out of fairness, I
ask that we make the same number of posts. You
started with the first post, and I don't know if
you debated in high school or not, but the rule is
that each debater has an equal opportunity. If
you make a 5th post, you must allow me one more.
If you want to make the last post, then consider
yourself not really interested in formal debating,
just trolling.