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Date: 2019-07-16 Page is: DBtxt001.php list0300-Profiteering-1

Definitions for TrueValueMetrics
Profiteering

The idea of making profit has a good justification ... but the idea of making maximum profit, and doing this at the expense of the disadvantaged or because of some form of break-down of the market mechanism ... cannot be justified.

The idea of more and more is a sad outcome of a material society ... and profiteering arises when the opportunity to make more and more profit emerges because of some disruption in the fair behavior of the market.

War profiteering is a well known example of profiteering. In a war situation, there are usually shortages in many items because resources have been diverted to the war effort. Some people have control of items for which there is a demand, but not much supply. A market equilibrium is not possible because of the supply constraint ... so prices can be anything that people can pay. In a war economy, prices are usually controlled so stop price gouging and profiteering ... and punishment for infringement usually severe.

The idea of “alpha” in the stock market is almost a vindication of profiteering ... with alpha being the earning of more profit than would be considered normal.

Concentration of economic power makes alpha easier ... makes profiteering easier. Anything that makes the market less efficient favors those with economic power and works in most cases to diminish the competitive position of those with the least power ... those in the most poverty.

TVM recognizes that cost and price determine profit ... and that without any other metrics, a free society will maximize the profit metric. However, if there is also a value adding metric, then there can be a balance between the maximization of profit and the maximization of value adding.

The use of both profit and value adding as metrics of performance has the potential to make profiteering less attractive ... especially in circumstances where the profit process is associated with value destruction in the broader society.



The text being discussed is available at


TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
It has been funded by family and friends plus donations from well wishers who understand
the importance of accountability and getting the management metrics right.
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