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December 29, 2006
The Trail of Profits
Some people see profits as earnings that go to a relative few at the expense of workers. But N.C. State University's Mike Walden says that economists have a different viewpoint.
"First of all," Dr. walden says, "you have to remember that most companies are run by certainly having workers, but they also use other things than workers: They have to have buildings, they have to have machines, they have to have technology. So all the revenues of a company are certainly not going to go to workers.
"The other thing you have to remember is that companies are risky," he adds. "And there are investors who are putting up their money, and the profits that a company earns are in some sense a return to those investors.
"And the third thing that I think folks should realize is that investors can be a very diverse group, the investors who receive the profits. I think many people think of them as bigwigs or a relatively few number of people. But if you are an individual and you have, for example, investments in a mutual fund or you have investments through your pension fund, those funds in turn will be invested in companies, and the return that you get on your mutual fund or your pension fund will in part be dependent on profits.
"So profits can be distributed very widely," he concludes.
Posted by deeshore at December 29, 2006 10:04 AM