Tag Archives: profits

Profits good

I'm sure Stephen L. Carter is a smart guy, but his opinion piece in the Washington Post today is unquestionably silly.  Here's how it begins:

A specter is haunting America: the specter of profit. We have become fearful that somewhere, somehow, an evil corporation has found a way to make lots of money.

Ok–who can see the problem?  Is it profits simpliciter (I used the Latin phrase since we're talking about a Yale law professor's thoughts here)?  High profits?  Or, perhaps, are we talking about disproportionately high profits earned when people don't make disproportionately large amounts of money?  I'm confused.  But let's continue.

Flash back three years. In 2006, Exxon Mobil announced the highest profit in the history of American corporate enterprise. Politicians and pundits stumbled over each other to call for an investigation and for some sort of confiscatory tax on the money the company earned. Profit, it seemed, was an evil, but large profit was even worse.

Again, I wonder, was it the simple fact of their making a profit, or was it there making a certain kind of profit.  Those, I think, are different propositions.  And indeed, when one considers the amount of public treasure (US military) spent on making Exxon's private wealth secure, one wonders whether it's fair for Exxon to reap rewards incommensurate with their contribution to the res publica, the public thing (Latin again).

Today, the debate on the overhaul of the health-care system sparks a shiver of deja vu. The leitmotif of the conversation about the coming shape of health insurance is that the villain is the system of private insurance. "For-profit" firms come under constant attack from activists and members of Congress.

Thus, a recent news release from the AFL-CIO began with this evidently alarming fact: "Profits at 10 of the country's largest publicly traded health insurance companies rose 428 percent from 2000 to 2007." Even had the figures been correct — they weren't — we are seeing the same circus. Profit is the enemy. America could be made pure, if only profit could be purged.

This attitude was wrong in 2006. It is wrong now. High profits are excellent news. When corporate earnings reach record levels, we should be celebrating. The only way a firm can make money is to sell people what they want at a price they are willing to pay. If a firm makes lots of money, lots of people are getting what they want.

Again–profits, high profits, disproportionate profits, and now profits illegitimately gained.  The problem with the high profits of the insurance companies is that they depend on their not paying claims–on their denying people the insurance that they have paid for (or charging a lot for very little).  Further, it's wrong to talk of "price their willing to pay" when it comes to insurance–one typically has little to no choice in the amount one has to pay or to whom one pays it.

This argument is already so bad that it's not worth continuing to criticize it–the rest goes on to argue that profit is good (including price gouging during natural disasters!).  But no one, save for a few college socialists (and really not even them) denies that profit simpliciter is a positive thing.  They just hold that profits of certain types and quantities are not necessarily a good thing–case in point, health insurance.  The confusion at the beginning makes this argument a case of equivocation, but the fact that the argument sets up a non-existent opponent makes it a very nice case of a hollow man (with a bit of weak man and classic straw man).  In other words, awesome take down, professor Carter, of an argument no one has seriously made.