The Joy of Corporate Profits :: Corporate Profits Pay For Universities

Whether its Nation of Islam Minister Louis Farrakhan leading the Million-Man March, anti-WTO protesters or AIDS activists, were frequently tempered to the chant demanding People Before Profits. Since profit demagoguery is a deceptively appealing tool used by scoundrels everywhere, lets de-mystify the concept of profits.Lets first get its comment out of the way. Profits represent the residual claim earned by enterprisers. Its whats left after all other costs - wages, stock split, interest - have been paid. The entrepreneur is generally seen as the person who takes risks, innovates and makes decisions. Its important to recognize that profits are a cost of business just as are payments to labor, land and capital. If wages, rent and interest are not paid, labor, land and capital will not be offered similarly, if profit is not paid, entrepreneurs wouldnt be seen either.Roughly six cents of each sawbuck companies take in represent after-tax profits. By far, wages are the largest part o f that dollar representing to the highest degree 60 cents. As percentages of 2002 national income, after-tax profits represented about 5 percent and wages about 71 percent. Far more important than simple statistics about the magnitude of profits is the role played by profits, namely that of guiding resources to their highest valued uses, determined not by some tyrant but by ordinary peoples wants and desires. Lets discuss just a fewer examples.When coca Cola introduced the new Coke? Pepsi Cola president Roger Enrico called it the Edsel of the 80s, representing one of the greatest marketing debacles of the 1980s. Who made Coca Cola Company bring back end the old Coke? Was it congress, the courts, the president, or other government officials who claim to have our interests at heart? No way. It was the specter of negative profits (losses) that convinced Coca Cola to bring back the old Coke. Thus, one role of profits is to discover what consumers want and if producers make mistakes, correct them.After the 1992 massive destruction caused by Hurricane Andrew, South Florida stores sold sheets of plywood for twice the price it had sold for prior to the storm. Escalating plywood prices brought charges of price-gouging and prosecutory threats. But look what higher prices and the potential for windfall profits did. plyboard destined to be shipped to the Midwest, West and Northeast suddenly was rerouted to South Florida. Lumber mills increased production. Truckers and other workers worked overtime so as to increase the handiness of plywood and other construction materials to Floridians.