Problems in Providing Adequate Statistics on Business Profits

Abstract

H ow will business profits be affected by changes in business activity and prices? What effects will changes in profits have on business capital expenditures and private entrepreneurial incentives? Answers to such questions are involved, either explicitly or implicitly, in numerous decisions made at different stages of the business cycle. Answers to such questions have been especially important in the transition period; for example, it was evident that early repeal of the excess profits tax would leave unusual profits, reflecting wartime maladjustments, available in the hands of some groups in the economy. Who would or should get the benefit? The entrepreneur, through larger profits; the wage earner, through higher wages; or the consumer through a reduction in prices of product or services; or should all three share? Our ability to answer such questions or to determine what is happening currently depends to a considerable extent on the statistical data on business profits. The needs, in general terms, are for better over-all figures on the level of business profits as a share of the national income; for more comprehensive and better stratified figures on the relative profitability of business in individual lines of activity in order to interpret current changes in volume of activity and prices in terms of their effect on profits. Last, but not least, we need to have profits data for recent periods available much more promptly. The problems of securing adequate statistics on business profits can be best considered under three main headings (1) adequacy of coverage of the business universe; (2) adequacy of items and their classifications for major analytical purposes; and (3) degree of promptness with which data become available.