> Fascinating -- thanks for the clarification, Ed. I am still perplexed by the > assertion, then, that NIPA does not take profit statements from corporations > in its calculation. If 'profit' is part of the GNP calculation, how is it > tabulated, if not from corporate Statements?
We are in a dilemma here, and I wish that someone who really knew something about national accounting would come forward and rescue us. But let me try to guess. I would suggest that before they are paid out to someone as dividends, corporate profits are simply viewed retained earnings that the corporation is free to either disburse or keep in a reserve account of some kind. Once paid out as dividends, they become income, but not until. Please remember this is a guess. I'm not an accountant. But my wild guess may put a somewhat different slant on the question of whether overinflated profits have actually distorted national income. If the money was not paid out, they would not have done so. What seems to have been the case with Enron, WorldCom, etc., is that overstated profits actually masked large losses, and corporations making large losses would not be in a position to pay dividends. What the shell game appears to have been about was to inflate share values and make a lot of money that way. But is selling an inflated share income or is it a capital gain - i.e., a gain in wealth? This is where I had better stop guessing. There was an interesting article in the Globe and Mail yesterday that argued that if a number of Canadian companies had been required to expense the stock options they gave to their employees, their rather impressive profits would have turned to unimpressive profits or even completely unimpressive losses. It all seems rather strange and wonderful. Where is Lewis Carroll when we need him? Ed
