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Should Profit Be Controlled?

 

If we look at profits from socialists point of view, we find that they believe in the abolition of profits. According to socialists, the value of the commodity is determined by the quantity of labor expended during its production. As all value is due to labor, so it must go to him and not to the entrepreneur. If the entrepreneur takes away something from the share, of the labor, that is legalized robbery.

 

In our opinion, if the entrepreneur is earning normal or abnormal profits by superfluous means, then they must be checked.

 

For instance, if an entrepreneur is paying less to the labor than their marginal net product or is bribing the legislature for passing tariff legislation, or is selling the goods in black market in order to maximize the difference between the total receipts and the total costs of production, then every sane person will condemn this behavior of the entrepreneur and will regard these profits as unjustified.

 

Similarly, if an entrepreneur due to his monopolistic position charges too high price for his products and thus fleeces the customers, then that kind of profits can also not be defended and so they should be controlled.

 

But if a businessman is earning just normal profits by honest means, then they can be justified in every respect. Profits are an incentive to the entrepreneur for undertaking, coordinating, directing and bearing the risks in a business. If the entrepreneur is not duly rewarded for the role which he performs in the process of production, then all production activities will come to a standstill.

 

Profits are the payment for the services of an entrepreneur in production and so they must be paid to him.

 

We, thus; conclude that profits which an entrepreneur earns by unlawful means should altogether be checked. The abnormal profits which an entrepreneur gains due to his monopolistic position or by sheer chances should be controlled and the normal profits which serve as an incentive payment to the entrepreneur must remain in the business so that the productive activities of the economic organization may progress.

Relevant Articles:

Definition of Profit
Difference Between Accounting Profit and Economic Profit
Theories of Profit
Should Profit Be Controlled
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance
History of Money

 

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