Over at Carpe Diem, Mark Perry has an interesting piece on perception vs reality. It turns out, the average person in a Reason-Rupe poll believe the average corporation enjoys a profit margin of approximately 36% (in other words, for every dollar they take in, the corporation keeps $0.36). The reality is different, however: the average corporation enjoys a profit margin of about 7.5% (the median is 6.5%). Some firms, such as Wal-Mart, enjoy even less, at about 3.1%. Wholesalers and restaurants often operate at less than 1%.
Why is this important? Economics is, after all, a dismal science. This is important because activists call upon government to make policy based on their false assumptions. They argue from ignorance and demand government do something based upon their ignorance. This ignorance is why we end up with such harmful economic policies like minimum wage, protectionism, high taxes, and burdensome regulations. No one would ask a man off the street to perform brain surgery, and yet economic policy is debated and determined in exactly that way.
It is no crime to be ignorant of economics, but to hold an unwavering and demanding opinion while remaining in a state of ignorance is just downright irresponsible.