What is Just Profit?

Abstract

An excessive profit is condemned by virtually everybody, both from a sense of exploitation and a suspicion that high prices must have been charged for goods or services. Some are even critical of profit as such, while reluctantly conceding that a reasonable return is necessary if enterprise is to succeed. The ethical-economic problem of how much profit may be justifi? able, it seems to me, is connected partly with definition and pardy with the need for just1 returns to the production factors concerned, while the latter raise the issue of just price for product. Hence, some interesting work arises in trying to straighten out what is the amount, if any, of just profit and who is entitled to it. Profit in ordinary speech means the return from employing capital2 in economic enterprise after the various factors purchased or hired have received their contractual payment. Both the accountant and economist refine this, the former by using the conventions of his profession and tax law and the latter by insisting that all factors employed be considered as receiving some going rate of return. A typical illustration is the variety store independent who must account for all explicit and implicit costs before profit emerges as a pure excess. But stripping off returns to all factors before arriving at the economist's concept of profit raises problems for both posi? tive and ethical analysis. The actual amounts of wages, interest and rent paid or due implicitly must, if necessary, be corrected to some going or normal rate, and the latter again corrected to just rates, before one may assess profit from both a factual and normative point of view. In the background looms the matter of just price. So let us tackle each of these issues patiently.