Most people know that Americans benefit from high taxes, powerful unions, limited consumer choice, and strong government control. But most people lack the training to fully understand why we derive benefits from these policies, and why government control over public anything results in unsurpassable quality. To remedy your "knowledge deficit" you can ask us any question you choose, and it will be explained by the legendary Professor Paul Krugman in a language that you can understand. From the evils of profiteering, corporatism, and economic exploitation to the rewards of regulation, social justice, and community/stakeholder involvement, Professor Krugman will use his agile mind to clarify the otherwise intimidating field of economics.

Economics Primer 12: Profits

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Profits are unearned income that greedy corporations make by gouging customers.

Let's take a closer look. Let's say you go to Wal-Mart (for shame!) and purchase a typical item for your demographic group -- say, a fishing pole. You pay five dollars for the fishing pole, but the pole only cost Wal-Mart one dollar to buy. We then say that Wal-Mart has an unearned income of four dollars. Ideally, the fishing pole should have cost you one dollar (i.e., the cost of producing it by exploiting Chinese slave labor), but Wal-Mart extracted an additional four dollars from you. (For shame!)

Now, let's look at what Wal-Mart does with this four dollars. A portion of it goes to the Republican Party in bribes, and the rest makes the Wal-Mart fat cats even fatter. But how does all this money get to the fat cats?

  • A) They use their profits to purchase even more slave-labor goods -- which are then also sold for profit. This turns into an endless profit spiral, where profits lead to more profits.

    B) They buy real-estate and build more stores -- further exacerbating the profit spiral.

    C) They hire more people to work in their stores -- leading to increases in Wal-Mart employment (and profits) when people would clearly be better off choosing to work elsewhere.

    D) With increased sales volumes, they lower prices -- which encourages more sales (and consumer sloth) and more profit.

    E) With increased sales volumes, they raise prices, which increases profit.

    F) With increased sales volumes, they do not change prices, which locks in their profits.

Furthermore, their huge profit margins might attract other firms to compete with them for "their share" -- and thereby create even more profitable companies.

How can all this be corrected?

  • A) By compelling all companies to sell everything at cost.

    B) By taxing all profits.

    C) By filing class-action suits that demand reimbursement of profits and an additional 50% reparation for pain and suffering.

    D) By aggressively enforcing all anti-trust laws.

    E) By encouraging unionization; i.e., one voice for all workers.

    F) By prohibiting noxious corporations outright.
And from a moral perspective, we as a nation need to ask ourselves questions like:

  • A) Should pharmaceutical companies (and doctors!) make money on people's poor health? Would it not be preferable to compel them to produce drugs and treat the sick for free -- out of their motivation for helping others?

    B) Who ought to say what a company is allowed to do with their income? The stockholders? (Hint: No.) Or the stakeholders like community groups and politicians?

    C) How have we, as a people, made our last dollar? Should you, dear pupil, ever accept compensation for anything? Or would it be more gratifying to selflessly work in the service of others for free?

    D) Is it right that anyone should be making money while others do not? Remember: When no one makes profits, there will be no poor people. Instead, we will all be equal.
Fortunately, there is a very simple and painless way of removing profits: A strong government (with the coaching of acknowledged international economics professors) can simply legislate that everything should be free. Then, by the force of law, there will be ubiquitous and equal wealth without the need for profits. All it takes are some signatures to make it law...but do we have the courage?

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Comrade Kurgman,

I was enthusiastically behind Comrade Schumer's Windfall Profits Tax.

However, much to my horror, I learned that a vast majority of my black market 401k is vested heavily in Exxon Mobil.

Should I screw myself and support the tax anyway?