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- Title
The Profitability of the British Motor Carrier Industry.
- Authors
Schenker, Eric
- Abstract
In theory, profitability is a good guide to both economic and technical efficiency. Since it is related to the difference between costs and prices, it reflects both the scarcity of inputs and the wishes of the consumers and is therefore a measure of economic efficiency. In those industries where prices are more or less given to any individual firm—and it is reasonable to assume that this is the case for freight rates in motor transport— profitability is also a measure of technical efficiency: it reflects a firm's ability to hold down costs and its speed of reaction to changes in the market. In practice, there are serious disadvantages associated with profitability as a measure of efficiency. Such disadvantages do not result from any monopolistic power of motor carriers to influence prices; motor carriers, including the nationalized. British Road Service, always have to bear in mind potential competition from private carriers which is likely to occur whenever there is no difficulty in obtaining 'C' licenses. A basic factor is changes in the state of the economy. In a depression profits tend to be low and in inflation they tend to be high, yet neither condition is attributable to the policies of any individual firm or industry. There are further shortcomings of a statistical nature following from accounting conventions which determine the calculation of profit figures. In times of inflation such figures tend to be exaggerated as a result of basing depreciation on historical costs. The difficulty can be overcome to a certain extent by using profit figures gross of depreciation but it cannot be entirely eliminated. In any measure of profitability, profits must relate to capital resources used and invariably estimates of capital are also based on historical costs.
- Subjects
UNITED Kingdom; AUTOMOTIVE transportation; AUTOMOBILE industry; TRANSPORTATION; INDUSTRIES; MOTOR vehicle industry; AUTOMOBILES
- Publication
Land Economics, 1965, Vol 41, Issue 3, p257
- ISSN
0023-7639
- Publication type
Article
- DOI
10.2307/3144858