Oh, wow, oh, oh, oh, wow, oh, oh, man.

Oh, my life.

And the world. Hello, you're listening to The Science of Everything podcast, Episode 16, Profits and Competition.

This episode continues on from episode 12 on the price system, and so I'd advise listening to that episode before listening to this one.

So in this episode, I'm going to talk about the profit motive and the uniformity of profit principle,

how the uniformity of profit principle helps to increase the efficiency of the free market economy,

and also how freedom of competition in free market economy promotes innovation, entrepreneurship,

but whilst also maintaining discipline upon entrepreneurs and businesses in the activities that they undertake.

This is all the continuation of how a free market economy can operate to efficiently allocate the resources in an economy and generate a large amount of wealth without any central planner controlling the entire system. So first of all, I'm going to talk about the profit motive. And before we do that, I have to define what are profits. Well, the rate of profit is simply the difference between sales revenues and costs,

divided by the amount of capital that is invested in a particular industry.

So profit itself is just the difference between revenues and costs.

So the amount of money that you take in in your business,

minus the amount of money that you have to in your business minus the amount of money that you

have to pay in order to buy inputs, pay labor, rent, all those sorts of things.

So that difference is simply profit.

That's a fairly common sense principle.

The rate of profit takes that total net amount of profit and divides it by the amount

of capital that is invested.

So that's the total value of all the assets

that you have embodied in your business. It would include things like buildings that you own,

computers, machinery, other things like that. And the rate of profit is an important concept

because it's really the rate of profit that determines that is the driving force of the

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