“Profit derives from the Latin, proficere, profectus, to advance and progress,” Oxford Professor Colin Mayer reminds us here. “That is what profit should come from.”
Too often, however, businesses leave out of their profit calculus the costs of negative externalities for which they are responsible. This allows businesses to report misleading figures; financial statements that claim to be “true and fair” are “neither true in reporting true costs nor fair in reporting a fair or just profit,” Mayer scorns. In such circumstances, rather than marking reward for progress, firms unjustly profit from the reverse.
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