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Different ways of describing the same thing. And would be used
according to what it is that is being described.
arthur
Arthur,
What is the difference between a residual and a
surplus?
REH
----- Original Message -----
Sent: Thursday, December 25, 2003 7:32
PM
It
seems that all returns to capital vary with the degree of
risk.
Money in a secure FDIC or CDIC account will earn less than in a bank
which does not have such insurance. The higher returns
covers the added risk if the bank fails.
So
too with mutual funds. "investors" are looking for a range of returns:
the "growth" funds have earned more but have brought greater risk.
"Safe" funds bring a lower return but are usually safer, but still not
insured by FDIC or CDIC
The capitalist invests in a venture. After paying for
production (materials, labour, distrib. etc. etc.) costs there is a
residual, this can be called profit. Usually the first entrant, if
successful, has greater returns than would be the case than if invested in a
range of other options. These higher returns are called "abnormal
profits."
Interestingly in economic theory it is this profit that is said to
draw in new entrants to the market, so many that these "abnormal" profits
are brought down. With competition comes a whittling away of profits
and with entry and exit there is some degree of normalcy in this new
market.
With new entrants the remaining businesses are earning "normal"
profits (probably a few points over risky bonds, but who
knows)
Phew...Now I remember why I refused to teach
economics.
good holidays to all.
arthur
I guess you have me,
Brad. We all take risks. I too read about the mother who had
to leave her kids at home and suffered the consequences.
However, I was dealing with a specific kind of risk, the one
associated with business startups etc. And I wasn't talking about
the entreps, like Trump and Lord Black, who already have a tremendous
amount of wealth and to whom it really doesn't matter much if their latest
venture goes sour. I was talking mainly theory about the little guy
in a competitive system who puts his life savings into something that
might not work out. Maybe there aren't many people like that any
more, but received theory likes to pretend there are.
Ed
----- Original Message -----
Sent: Thursday, December 25, 2003 2:32
PM
> Ed
Weick wrote:
> > Keith and Brad, I wasn't discussing what people
in the real world do, I
> > was referring to risk as seen in
economic theory, as in Frank Knight's
> > 1930s classic "Risk,
Uncertainty and Profit". However, I would suggest
> > that
even in the real world, entrepreneurs and people who follow them by
> > investing in what they are doing take risks whether they
recognize what
> > they are doing or not. Risk is
something that can be estimated
> > actuarily and
probabalistically - i.e., assuming rational behaviour,
> >
considerable information, a high level of technical skill, etc., you
> > can make a quantitative statement of the likelihood that
something will
> > succeed or fail, like a business venture, or
hold together or fall
> > apart, like and aircraft
component.
> [snip]
>
> Of course entrpreneurs
take risks.
>
> But so to do minimum wage burger flippers --
it's just the
> latter risk more but can hope for less gain if they
win.
>
> I think,for instance, of one woman I recently read
about
> in the NYT, who had just been promoted to shift
manager
> at a McD. Her baby sitter failed to show up, so
she
> faced the risk of leaving her two small children at
home
> alone or losing her job (which was, of course, her
>
hope of getting up in life for herself and her kids).
>
>
Well, she went to work, a fire broke out (the article
> said it may
have been arson), and I forget exactly
> what happened, but it may
have been that
> the children burned to death.
>
> So,
verily, entrepreneurs take risks (DOnald Trump L'Oeil
> invests a
zillion dollars in a new casino, and the
> casino may indeed not
turn a profit, but the Donald
> will probably be able to reflecgt on
his loss from his
> Trump Towers(sic) penthouse, if worst comes to
worst).
> But you know all about those things, like we all
do.
>
> I think I'd rather
> take entrepreneurial risks
than the risks the people they hire for
> wage labor take, wouldn't
you? But I would not call it
> takng an entrepreneurial risk
if *I* trid to
> start a business, because I, unlike The Donald, do
not
> know how to play the game, and it's not a game many
>
can afford to learn by doing without a safety net....
>
>
What's the point of my tirade? To deconstruct the
> putative
heroism of our entrepreneurial "risk takers"
> (as opposed to the
supposed timidity of the workers,
> which justifies the latters'
penury and the formers'
> wealth!),
> so that, if they have
more dollars in their tills, they
> still do not need to also get
looked up to. Enough
> is enough.
>
> There are,
alas, heroes. SOme of them are even
> from the privileged
classes. I think of Senator
> John McCain (son of an admiral),
who actually
> went to fight in Nam (unlike fly-boy Georgeie
B!),
> and who, when taken prisoner of war, refused to
> be
released by the north Vietnamese unless they
> also released all the
other American POWs whose
> daddies were nobodies so the North
Vietnamese
> had no interest in treating *them* nicely.
> Let
us see how well each of the privileged
> measures up to Senator
McCain's standard.
>
> From those to
whom much has been given,
> Much should be
expected.
>
(--me)
>
> Cheers!
>
> \brad mccormick
>
> --
> Let your light so shine before
men,
>
that they may see your good works.... (Matt 5:16)
>
>
Prove all things; hold fast that which is good. (1 Thes
5:21)
>
> <![%THINK;[SGML+APL]]> Brad McCormick, Ed.D.
/ [EMAIL PROTECTED]
>
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>
Visit my website ==> http://www.users.cloud9.net/~bradmcc/
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