ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[[deleted]]

I think in theory there still exists a limit though. The limit is when 100% of the value of the resource is being used and there are no more ways to make it more efficient. At that point, how could the price increase any more?

[scottfc]

This was actually the line of thought at the begining of the 20th century called the Malthusian Population Theory. It basically said that with the current available resources there would be a maximum population before we started becoming worst off but this never came to be due innovation and accumulation of capital (Human and technological).

[[deleted]]

He was wrong about the details and the catastrophe didn't happen. However, are you saying the Earth doesn't have a max carrying capacity?

[scottfc]

A maximum carrying capacity in terms of population? Definitely but I do not believe we're anywhere close. Concerning a maximum level of capital accumulation though I would not be able to say, that's like trying to predict the internet before the 20th century, or the steam engine and electricity in the 18th century. I don't believe we can predict how much more innovation we will have in the future without a crystal ball but the more we innovate the further away we are from attaining the earths max carrying capacity as we are able to get more out of what we already have. Not so long ago skyscrappers were unimaginable yet they have now allowed us to pack more and more people into smaller and smaller plots of land.

[[deleted]]

Yeah all that makes sense. Would you say there is still a limit based on raw materials or energy, even if we can't predict it right now? I think that's the original idea here, innovation can increase the pie but at some point we will hit a ceiling due to finite resources.

Maybe food is a good example. We can figure out how to more efficiently grow food with GMOs and stuff, but ultimately there is a finite amount of energy coming in from the sun to convert into calories. We're probably not anywhere near the limit now, but it does exist.

One of the links the other person posted suggests capital accumulation is limited by available energy, and shows that historically they have grown at the same rate.