It's a defined term in economics. Normal profit is when enough profit is made to pay the workers and managers a reasonable wage and for the company to remain in the market. Average Revenue = Average Total Cost.

super-normal profit is when Average Revenue > Average Total Cost and economic theory says this should only ever occur temporarily as it means there will be incentive for others to enter this market as it is clearly very profitable.

It is therefore very easy to tell which and how many businesses are making super-normal profits.

The interesting question is how they are doing this.

That is because Economic theory also assumes the super-normal profit is being made [iwhile still paying the workers and managers a reasonable wage[/i.

So if we end up with firms making super-normal profits while [inot[/i paying the workers and managers a reasonable wage i.e. ending up with Average Revenue > Average Total Cost by exploiting the workforce or relying on in work benefits as a subsidy, then any such firm is making super-normal profits is not doing so because they have cornered the market but are doing so at their workers and the taxpayers expense.



The fact John Lewis and Richer Sounds are more successful than many of of their competitors gives lie to what you say above. They value their staff and for example John Lewis are for more successful than M&S who under successive chairmen have abandoned treating their staff as they once did (in a similar way to John Lewis).



I have no idea what the implications of that would be and neither I suspect do you. Nor do I understand why you mentioned it.

I agree in the USA especially in the Clinton era there was government support for extending the American dream downwards to those on lower incomes by making them have access to credit.

But in the UK the problem was the politicians didn't meddle with it. There was no policy of encouraging subprime lending from the Blair government and if you think there was how about find some policy measures and/or government statements in favour of extending credit to those on the lowest incomes....?

So?


Clearly not, because you are paying it. You are even using more power to argue with me here.


You're effectively arguing against private hire taxi drivers here. They rely on state infrastructure. Do you propose taxis should be provided by the state?


Not happy with hard working taxi drivers then?



You're arguing against a lawless and unregulated free market. Thing is, nobody is arguing for that.
Which particular market do you think you serve?
Which book should I read about North Korea? Was it written by a private enterprise, or a state?

If you value it as too expensive for you then that only applies to you, not anybody else. What alternative do you want?

They may well value their staff, but saying they're more successful because Mr Richer lets them have a go in his Rolls Royce every now and then is fanciful.

So, just what the staff at these 2 companies get? Salary? Pension? Bonuses? Private Medical Care? Shares? Holidays etc etc

For comparison, The M&S company pension scheme has 3% employee 6% Employer Contributions for new starters, after 2 years this goes up to 6% and 12%. Which isn't bad.

The point being that John Lewis and Richer Sounds are highly successful businesses, which is a very nice illustration of how you do not have to shaft your workforce to be successful and highly profitable.

I'm not personally familiar with Richer Sounds, but I am with John Lewis, and a key reason I go there when I need, say, anything for the flat is because the standard of service is so much better than most other places. And that also means a standard of service that includes honesty and not just an intention of flogging you something come what may. Thus they get my return custom – and my recommendation to other people.

In other words, treat people well and value them and give them a stake in the success of the business and you improve the business because you improve the standard of work.

The fortunes of M&S, on the other hand, are declining.

That is the same for anything though isn’t it?

Either a market that actually works, which in this instance likely to be impossible, so failing that a nationalised industry able to supply a necessary utility at an affordable price.

I;ve already explained that to you.

Under free market economic theory that would be the case. But those companies aren’t operating in a free market. They are operating in a highly regulated, massively subsidised one using what was nationalised infrastructure where there isn’t a realistic alternative. Your premise here is wrong.

In what way are taxi drivers subsidised by the state? They do use state infrastructure, they do pay towards that infrastructure, they are also highly regulated and often their prices are set at a reasonable level by the local council. I am perfectly comfortable with that.

To borrow a tactic from yourself? Why differentiate? Why only hard working ones? Why not lazy ones? Whats the difference?

Nobody is arguing for that, I accept that. You are however justifying excess using that economic theory. You are using the free market theory, where the capital will find the best product, where people will pay a products worth and that is how it finds its value, and that risk takers and wealth creators should be rewarded for the risk they take and the wealth they create and applying to markets which aren’t free markets, where the wealth created is subsidised by the state and the risks taken are mitigated by the state. You cannot apply free market theory and justifications to a managed and subsidised market
myself? Media.
Any. In fact all. dont limit yourself to one.

No you haven't


Why is it wrong?


Is our road network, traffic police, not provided by the state then? I guess we should shift food distribution from the likes of Asda and Tesco to the state too.


Just take out the "hard working" then




Why not? Remember, it's freer market, not free market in your measurements.


Interesting.....so how do you think the media market exists to make you serve it, and how should it change to serve you instead?


I should read all the books about North Korea? BRB in a mo then.

The likes of JLP certainly have their place. Whilst they might be the preferred retailer for the likes of you (and we got most of our furniture there) there is also a place in the world for "no-frills low cost" retailer who doesn't give good service but is cheap. Some of those will be succesful, and some won't, just like those at the premium end of the market.

Oh I think you will like Julian Richer....

"It was no surprise to hear Richer, 54, who still holds 100 per cent of the company he started 35 years ago, explain this week how he has formed a trust for when he dies so that the business becomes a mutual, similar to John Lewis, under which every staff member receives an equal share, with the IT director, Julie Abraham, stepping up to managing director."

[url=http://www.independent.co.uk/news/business/analysis-and-features/high-fidelity-julian-richer-rewards-staff-loyalty-with-holiday-homes-and-trips-on-the-company-jet-next-hes-planning-their-inheritance-8952760.htmlFrom here.[/url



Quite and they treat their staff pretty poorly these days. I have a relative and a neighbour who work for them who can vouch for how things have declined over the years. Do they go the extra mile for their employer these days where they once would? Nope. They do their hours and that is it.

I myself have often put in stupid hours and worked weekends when on-site to get IT systems installed but I didn't do it because I was compelled to or out of fear for my job. It was done because I knew my services were valued and not just monetarily e.g. allowing flexibility to deal with child care issues.

Why some people and business leaders can't grasp if you treat people right they will be loyal to your company and work hard so your company benefits is beyond me.

:25gbar3rYes i have.

:25gbar3ri explained that to you in the paragraph that said the premise was wrong.

:25gbar3rThat doesn’t have anything to do with what I said.

:25gbar3rYeah, because it is irrelevant that they are hard working, just like it was irrelevant that small businesses also exist when we were talking about big business.

:25gbar3rBecause it doesnt work.

i think the barriers to entry need to be looked at in the media market. I also think that the state interference in terms of our regulation in some ways makes it work better, and I certainly think the BBC (who are a competing comany of ours) makes it work better precisely because its over-riding aim isnt to make profits. I am confident without the BBC's disruptive position within the market we would be far worse served in this country. (i appreciate 'media' is a lot wider than this but i am only commentating on what I am involved in)

Now I may be misreading this and, if so, I apologise in advance ... but you're suggesting (given the context of the discussion) that there "is a place" for staff to be treated as poorly as possible?

How do you determine what is average - it is impossible each companies sales/cost circumstances are different how do you compare Lloyds to HSBC? So give us an example of firm you believe are making super normal profits and explain how you think they are doing it.

The point about the 14% is simple - you want lower paid workers to have increased incomes. I am merely pointing out that companies do pay well above the minimum wage unfortunately the employee loses out to the tune of 14% which goes directly to the government. Perhaps diverting the monies from the government to worker would be a solution to the issue of low pay. It would also removed the need for the inefficient administration of redistributing the funds via income support.

You can still give good service and be cheap.

I am not aware of any business that treats it's staff "as poorly as possible"
Some businesses treat their staff well, and some not so well. Some invest in training and expertese, some don't want that cost. None that I'm aware of treat their staff as poorly as possible.

You've just descended into an "oh no it isn't" panto show now. Do you think this brings me or anyone around to your POV? I don't see any point continuing.



I asked what makes you feel you are being forced to serve this market rather than it serve you. We're clearly disconnected, because that isn't what you answered at all.

Yep, but there are levels of both service and cheap. There is space and a role for Ryanair and BA first class and other inbetween.

It doesn't mean average across all companies! It's the average cost etc that a company itself incurs over time. It is not a comparison measure that says you can compare companies against each other, just a statistic that tells you if a company is making a super-normal profit or not.

It is a well understood economic statistic and certainly isn't as useless as you want to imply given its used by economists and accountants all over the world. Google super-normal profit and you will see for yourself.

Which companies are making super-normal profits? I have no idea given I don't have access to the data but I am sure we can make an educated guess that companies such as Apple, Google and Amazon fall into this category.

How are they able to do this? Well in Apple's case no doubt it is their marketing nous that gets people buying iPhone's that has a lot to do with it and there is nothing wring with that. What is wrong is when such companies add to their profit by exploitation such as Apple employing sweat shop labour to assemble the things.



That wouldn't even bring a low paid worker on £12K up to the level of the living wage, you know the figure based on the Minimum Income Standard.

A person earning £12K takes home (after tax and Ni) £11,114.72. £213 a week. Add 14% to that and we end up with £13680.

On that salary they would take home a net wage of £12,257.12. £235 a week.

If we assume they earn the minimum wage to get their £12K which is £6.31 an hour then they will have worked a 36.5 hour week to earn it.

The living wage is £7.65 so were they paid that then they would be on £14450.30, take home £12790.82 or £246 a week for the same number of hours.

Given £246 a week is the recognised figure as a living wage you r idea doesn't reach it and at the same time denies the tax man revenue.

Depending on circumstance social security payments will still be required whether you are on £12K, £13680 or £14450.

So no, I would not say your idea is a solution to low pay.

I answered your question and I explained why. I don’t know what else you would want me to do other than point out this is the case.

As I tried to explain, I think we (not necessarily me as an individual, us as a society) allow the market to be our master because the barriers of entry our so high that our choice in some cases are limited, this allows companies within it to offer what is most profitable to them, rather than necessarily what we would want. This is an example of the Market being the master.

I then pointed out a contrast in the BBC acting as a disruptive influence within the market, serving us what we want, with profitability a secondary factor. This then forces the other companies in that market to respond and offer similar wanted, if less profitable things. This is an example of the market being the servant.

The markets that Apple, Google and Amazon are in are quite dynamic in that although there are only a handful of firms doing the same thing as them, they are producing goods that actually compete with a lot of different things outside their markets because they are essentially providing things to do with finding information, reading, watching videos, taking photographs, listening to music, and there are existing products that do all of these things. So they are involved in quite a competitive market structure.

The reason these firms make large supernormal profits is because they are innovative enough to produce products that are differentiated from what is out there and people want them, so this is driving innovation which is how technology improves and living standards rise.

The traditional market power of advertising is starting to ebb away now because of the proliferation of review sites and blogs etc. In the old days you could produce an average product and clever marketing could increase the value of it: the emperors new clothes effect. But now if you produce something thats a bit crap, it will get ripped to pieces on the internet and its easily accessible to people that want to research the product online.

The internet is good for improving capitalism because it makes information accessible, and when there is more information, firms lose market power and consumers become more powerful. I remember reading something recently about how in the cosmetics industry there has been a big market shift because traditionally cosmetics rode off the back of womens magazines and advertising: if you placed your product there it was one of the few products that the consumers got to hear about. However now a prime chunk of their audience (ie females aged 14-30) are now not influenced by direct advertising they get their information on cosmetics from reviews on fashion and beauty blogs most of which have just been started by some random 18 year old girl who then gets loads of followers. Peer influence and peer reviewing is becoming more significant and it is a threat to the advertising industry.

So what you are saying is I can't show you a company that makes super normal profits through exploiting its staff? The firms you quoted especially Apple and Google will be at the top end of pay and conditions as they need to attract the best people.

So if we gave the 14% directly to the low paid that would indeed be a two way win - the employee would get the money directly and it would closer to the living wage and we would cut out needless bureaucracy redistributing the funds

=#0000BFIt would be interesting if you, or anyone else could define this.

If you accept the principle of limited accountability, limited or no checks, just trust then "needless bureaucracy" is of course the way to go.

2 observations.

No one, to my knowledge, has defined needless bureaucracy.

When the last great " light touch, don't dig too far system was set free", the entire world economic system nearly went belly up.

[url=http://www.theguardian.com/technology/2013/dec/01/week-amazon-insider-feature-treatment-employees-workAmazon and how it treats its employees[/url.