Paul Krugman, the economist, has been blogging about 'Monopoly Rents' this week. Today in Profits Without Production, he explained it. It is when a company charges a consumer what it can, not what the product is worth. Pure capitalists would argue however, that whatever a consumer is willing to pay should be its value and price.
The American Industrialist Henry Ford did not have that philosophy. He wanted to produce something that the consumer could afford and provide great value. His automobiles used parts commonly stocked in hardware stores so that the consumer could repair the Model A or Model T themselves. But I digress.
Krugman uses Apple as the example for monopoly rents. Apple is enjoying unprecedented profits because the price of the product is far in excess of what it costs to manufacture. The difference between a fair profit and an Apple profit is a monopoly rent. It represents what the company can charge because it does not have adequate competition.
Krugman asserts that monopoly rents are dragging down the economy. It isn't just Apple. Think the airlines with their many service charges, or your wireless carrier. These companies are profiting because they can, not because they are providing that value to the consumer.
He uses an interesting comparison. General Motors at one time had tremendous factories an enormous workforce, about 1 % of the total American workforce. General Motors produced profit because it manufactured something. Apple in contrast, has very few employees and does very little manufacturing in the U.S.