what is profit? where do profits come from?

2090 words 9 pages
ECOP1001 Economics as a Social Science Essay

The essay should compare Two different schools of economic thoughts
Question 4. What is profit? Where do profits come from?

Economic theories simplify the relations among key economic concepts and enable us to understand different economic concepts. Throughout history, different economists in different time periods have formed diverse thoughts on how markets work by building and improving on the work of those who came before them. Therefore in order to gain a wider understanding of a particular economic term, it is helpful for us to investigate more than one economic theory. This essay will explore classical and Marxist and compare their portrayal of the concept of profit and where is it
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However, this then sets up the conditions for profits to increase again as capital accumulation stalls and organic workers are reintroduced back into the workforce. Indeed, there is an intrinsic link between profit and the accumulation of capital, and effects on one are correlated with the other.

Marx suggested there are five conditions for capital accumulation. Firstly, to minimize production cost by using the cheapest inputs (Stilwell, 2012). Secondly, to generate surplus value through raising productivity and intensifying work (Stilwell, 2012). Thirdly, to realize surplus value by creation of markets, e.g. through advertising, fourthly, through rapid circulation of capital, unimpeded movement of capital to generate profits for reinvestment, the role of transport, ICT, financial institutions (Stilwell, 2012). And lastly, through economic and social reproduction (Stilwell, 2012). These five factors also indirectly affect profit by either the reduction of costs or by facilitating the creation of a base for further production.

Marx pointed out division of labor is profitable for capitalists, by breaking down tasks and improving the work process. However, it leads to estrangement and alienation for workers (Stilwell, 2012). Workers do not work voluntarily but they need to survive by earning wages. Marxism states that profit is gained from the


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