The Role of Profits in a Market Economy

Dec 12, 2005


Dr. Russell Roberts
Professor of Economics and Smith Chair 
Mercatus Center at George Mason University

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Profit. The mere word evokes a variety of images, thoughts, and emotions. While some see profits as representing the epitome of greed, other people view profit as an ordinary part of doing business in a free economy. In light of high gasoline prices and high oil company profits, many are asking the question: “Can there be too much profit?”

While Americans were paying lofty prices at the pump, the five largest oil companies earned over $33 billion in the third quarter this year. To put that amount into perspective, that is $110 for every man, woman and child in the United States. As a result, the U.S. Senate has held hearings and some Members of Congress have suggested a windfall profit tax on oil producers. Is a windfall profits tax a good idea? Can profits be too high? Too low? What is the role of profits in a market economy?

To address these issues the Mercatus Center at George Mason University will host a seminar, featuring Mercatus Center Distinguished Scholar Dr. Russell Roberts, on the role that profit plays in a market economy. The program will help participants address such questions as:

  • What is the source of economic profit?
  • How do economic decision makers respond to profits?
  • When are profits too high or too low?
  • What are the effects of windfall profit taxes?
  • How do profits create our standard of living?