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Excessive profits are actually the catalyst for competition. THe cycle of capitalism and free markets looks like this: earn excess profits -> people build more
by SmartJerry 2y ago
Excessive profits are actually the catalyst for competition. THe cycle of capitalism and free markets looks like this: earn excess profits -> people build more supply -> prices come down and excess profits dry up -> people stop building -> earn excess profits. When you fix the 'prices come down and excess profits dry up' all you get is people stop building.
- medvezhenok 2y agoThat works in a well functioning, liquid market. If there are barriers to entry for new competitors (like regulatory hurdles, or zoning), this free-market theory falls flat on its face.
- nilsbunger 2y agoThe free market theory still works with the barriers, it’s just that the “excess profits” have to get even higher before someone steps in to build.