Basic economic theory predicts that a in a market with perfect competition, all firms will have zero profits (the economic definition, wherein opportunity costs are taken into consideration, nominal profits aren’t zero).
It’s interesting to observe the number of people who will post about capitalism and competition and not consider the fact that for any rational actor, competition is existentially horrible and should be avoided by all means necessary. Perfect competition exists purely as a mathematical model and not as an actually observed outcome of a “natural” system for a reason.
Perfect competition is one end of a spectrum, where the other end is monopoly. Monopoly is a stable equilibrium, whereas perfect competition is not. On a long enough timeline, a perfectly competitive system will decay into a monopoly and stay there unless acted upon by an outside force designed to break up the monopoly.
> Basic economic theory predicts that a in a market with perfect competition, all firms will have zero profits (the economic definition, wherein opportunity costs are taken into consideration, nominal profits aren’t zero).
In your simplified economic world, I'm not convinced that profits would be pushed below the cost of capital.
My simplified economic world is literally just paraphrasing established theory:
>Economic profit does not occur in perfect competition in long run equilibrium; if it did, there would be an incentive for new firms to enter the industry, aided by a lack of barriers to entry until there was no longer any economic profit.[0]
Your issue isn’t with me, it’s with what’s taught in every economics department in every country around the world.
(I also never said “profits would be pushed below the cost of capital”, my comment does not imply that at all. See: “nominal profits aren’t zero”)
It’s interesting to observe the number of people who will post about capitalism and competition and not consider the fact that for any rational actor, competition is existentially horrible and should be avoided by all means necessary. Perfect competition exists purely as a mathematical model and not as an actually observed outcome of a “natural” system for a reason.