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f*o 8 B m in g Br * Stasis* p ip er on corporate profit I think, Is an «coXl?gnfc prssscnfcation w different coacopta and differing emsuraj^nts of profits. I wmaM of this co&feresies* m it m3m bM In pe^pectiw on profit a w ry ob^ietiw mmmmsmmfc* m& thst it provides useful j& m & pXicitisr, Br« Sfe&nis points out that mart difficult aMition to the record certainly to* prm im e mmnmmmnt of profits in in a some profits arts *tot mosernot* t o * ss& vaxying accounting conventions s&ar they are* H a discisssion a M quick analysis of tfe© wt-iml soorces of infozmtion on profit® and the mrimss tint series relating to profit and infossmtiw* dtBcmmxit are l*otfc interesting I vaolisse that it Is dselAedly ii^pprofrlate for a to g iw wrtisxteft pmise to a paper* bafc I find nothing to criticise in Dr* limnis* psper a wry mm m ty m i l &mm and axA can express nothing ba§ auOntration for place of vork. I can eaas sonewh&t closer to the aoataal &iscnismnt#s role in com menting briefly cm Mr. puper* I t&lEfe It 1* egssally w i l *Som?, of corn'se, oaft Is vexy closely resy§on®&# bat it is desired to fee w provocative than Dr* Hsoaiift* report| *mr*X sfeauM say at the outset that I mm not in bsslc vitfe ih& taosA Mr* 3&sosi, t^it I can be m bit plsfcy that is «^ponsa& % certain .of- his concepts, per- hap® I should say certain of him definitions. »f I haw son© question as to tf v the nscfttlnass of bis concept of a pxre or a mturcX rate of interact which applies to ^ X a t iw ly t&m I! rimti&m® that this should be subtracted, ff & tm e profit figure* conaotjoently to the trm I I'mm t o t one rcportcs! profits so as to yield t%m caaoelve intellectually of a " pure” rate of interest, out X sSs^sXy &onft know ha/ to eonecpi and I really &on#t msmmm$ such a srae&ly vlsat it n&tns, aed therefore I find this idea not particularly useful in trying to get at what profits really arc* Sincc reported profits ms given are partly the predict of 1 Spftgaeaat, partly the paroduct of lo^&l iaterjaret&tioa, n tmct portly the n product at amzmm&lm cmrnsitlm, mad &lace the pure rate of Interest is not only mn elusive ecmeo&t hot a mte that m y v&ry over t t » , I find thmt rayself nasevhat lee,'*/ satisfied with using fitter a currently -incepted series on profits or me- adjusted for thal'pure’ rate of interest, -$=4P » f e $ = ^ f e i ^ I im also sot particularly happy vith Hr. Tyson’s defSjiitiari of utility that vhich 'Drinks p ! ^ M r of a good or service* moamtary Uhlle I t o pieafiure to the a solid belief in the desirability of iM ividm l free mrtet choice as the mast efflelozit spur to eeoaacoie effieiestey/ I camst go 51s t o a# he ummm to go vlth this t o ; hmuase I dotift quite see he** ot'ie can fit &fr schools* streets, and *w «ss, to mention three itegss, iato that pattern* M » finally* I teve eom M ersb^ lese certainty as to vhat is I think Mr. Uysm is quite right is pitting leisure ti m a little the growth. eam&pt, 'tout X*d prcfoahly odd/aare velf&re them he i c m s k gEWth* Into \*mM* In mmm$M a 'broesd growth* the output of the sense, 1 try to distinguish betsmeu tiro aspects of One la the c e c i t y of the econoe^, isud the ether is m m es^ * After having said that, I mist confess that I find it eawedlngty difficult to define or measure either- Wm having partly, at least, fulfilled the a w i role of the discussant hy being dis&ipree&ble, I w i t to turn to the larger arm of with Mr. fusion and go cm a bit hssyond M s paper. Certainly there 1© no <|uestion that the profit aystesa constitutes £Im» great driving force to eeonotaic growth. Certainly there is no question, as 1 noted earlier, that free choice on the part of has led to the traaeBdous g r o ^ of the Araaric&n economy, nor that this free choice eeooaalcally is fully c « s m a t with our entire political and social philosophy* Certainly there is no question, as the record clearly indicate#* that the American eeoaaaie arystea has t e letter than any £*sj other in providing the good things of life te the great Majority of the people. t e e point#, it $m m to me, are rsally hs^eai dispute* a I &140 think that tta savixi^, iimftawiffr, a M eeos&ssie g ro ^i m i be se©& reasoo&bl^r clearly em i thoufgi the links tet^mlmble nm tiBchaisgijsg, r^sd -Use tssmjUtg not be th e d riv e shaft m y 8*ov@> at m ^ iu g aiid iijgcrbgrraimt^ m tm of spaed aver a span of tlas* Butt it is fcigily i^portsijt to tfe&t ^ 6 lai to be m vi&g if thew is to be ifnmt&eatj m l that there lias to b@ ifrveat^nt if tte capacity of tfes ecoEroqy la to egp&afi so as to pemit <$eommic fp W ftlu tea it is Sfaally teporiant to incentive to save* that tor© sunt te fhere is little point isi deferring coomar^grtian if there is bo froepMst of $roc«&«r an in the future* I s&ia enrlter that I didn’t kao^-' what ^'purc?''rats of irsteroet is* I thick, however, I t o It tmrvm the func the lUoction of ttse ii&era*t rate, in tion of allocating resource asfi therefore it snst ms^r vith cais&ittom and srith tlae* Since saving is ijs^ortant* the ssate of interest should be hIgn eno®$\ to stimi&to saving. Since iw^satmat 1m mcmwxrj for groutb, the rate of Interest mat ’be lur onou^i to stljail&te barro%*ors to tttte Jftuods for 3tam |£rH ai^r ^ood intere&t rato for all tftwu Scnstiiaes bi$i xutaa are nocasaor?, maetlaaos Xosr ratm are* sense* I think the mm thing can 'b* saM about profits. htglb In a Ijro&t The^ no@& to b© to atiimjl&tc risk taking &n& nr*/ vmtimrm, i>«& vfcat is hi^s is relative to th« coodttlans and the tlaes. I wials r*e h&d seme better aa*&i»r««s£^ of profit# m m »lght more clm rtj sea over time and under ditfarejat situations their varying roles in the processes of economic fgtXMth* 3 October 23, 1964 Mr. Harold W. Stevenson Professor of Finance School of Business Administration University of Minnesota Minneapolis 14, Minnesota Dear Professor Stevenson: Some time ago you sent me a transcript of my comments on the paper which I gave at the Conference on Understanding P r o fits . The transcript is substan* t ia lly accurate, but I thought it might be more useful to you to have the typed transcript of my remarks as I wrote them out. I suspect I departed once or twice from the exact wording, but not enough to make any significant difference. Very truly yours, Frederick L. Deming Encl. SCHOOL OF BUSINESS ADM INISTRATION DEPARTM ENT OF BU SINESS FUNCTIONS AND MANAGEMENT M INNEAPOLIS 14 J u ly 22 , 196^ Dr. F re d e ric k L. Derning, P resid e n t F e d e ra l Reserve Bank o f M inneapolis M in n eap olis, M im eso ta ^ k 02. Dear Dr. Deming: A ft e r some u n fortu n ate d e la y s , we are now embarking on p re p a ra tio n o f a p u b lic a tio n o f papers o f the "Conference on U nderstanding P r o f i t s . 1* I am e n c lo s in g th e t r a n s c r ip t o f your comments on the paper by Dr. Mennis and the paper by Mr. Tyson. We have made no attem pt to e d it the t r a n s c r ip t a t t h i s tim e, and we wonder whether you may w ish to make m o d ific a tio n s or a d d itio n s to th ese rem arks. We can c e r t a i n ly remember th a t the luncheon program was p ressed f o r tim e, in view o f two m ajor papers as w e ll as in tro d u c to ry rem arks. Although we have not s e le c t e d a p u b lis h e r , i t i s l i k e l y to be e it h e r the U n iv e r s ity o f M innesota P ress or a commercial p re ss lo c a te d in the Twin C i t i e s . We a n tic ip a te a c t u a l p u b lic a tio n e a r ly in 1965* Although the A p r il Conference i s now h is t o r y , we would c e r t a in ly a p p re c ia te your a tte n tio n to t h i s p r o je c t . Your comments are c e r t a in ly a h ig h l i g h t o f th a t p o rtio n o f th e co n feren ce. Yours v e ry t r u l y , Harold W. Stevenson P ro fe s s o r o f Finance HWS: ih E nclosure