Exhibit A: from Wikipedia:
In economics, profit maximization is the short run or long run process by which a firm determines the price and output level that returns the greatest profit.
Which is of course not a myth at all. By trial and error and on the basis of very incomplete information, this is what businesses do - they tweak price and/or output levels.
Clearly, there is a sliding scale between perfect competition, where the market sets the price and all you can do is vary output levels; and a monopoly or cartel situation, where you can choose the best price/output combination to maximise profits.
It appears that the UK land bankers home builders have discovered that their profit maximising output level is somewhere in the region of 120,000 - 150,000 new residential units per year; they know that their own inputs (skilled labour, building materials) are price-insensitive, so an increase in demand for those means that their costs would go up disproportionately and profits would go down. Fair enough.
Exhibit 2: So why do all the Faux Libertarian twats in the City AM believe that if we "liberalise planning laws" that they will suddenly increase output? Why would they?
Which is why the six largest home builders own enough land with planning or outline planning for eight years' supply. If the government gave them planning permission for another million units or another ten million units, this would not change their profit-maximising level of output by a single unit.
(Of course, the whole notion that increasing supply of housing in high demand/high price areas would reduce house prices overall is nonsense anyway - there is simply no evidence for it or else house/land prices in large cities would be lower than in the countryside and they would be giving away apartments on Manhattan for free.
And don't give me "Spanish and Irish ghost estates", those were not built in areas of high demand/high prices and are thus irrelevant. They might as well have built them in the middle of the Australian outback for all the difference they make.)
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