Therefore those corporate CEOs who do not act entrepreneurially or whose forecasting ability is poor will tend, in a free market, to find themselves seeking employment elsewhere as their companies seek out more profit-driven replacements. Our definition of profits cast some intelligent light on Mills example of gas distribution assets. He argues that by allowing gas companies to value assets at 80 per cent above 'costs' regulators have really allowed them reap pre-tax profits of nearly 14 per cent. This is the kind of mistake one expects a layman to make. Costs cannot be calculated.
Costs are forgone opportunities which are entirely subjective in nature.
By discussing costs in this manner Mills has fallen into the classical error of treating costs as 'objective'. They at least had an excuse. The same cannot be said of Mills. As most of the gas companies' capital is specific it is actually costless because it has no alternative use, i.e., opportunity cost. The only costs these companies now face are anticipated alternative revenue streams, which are also subjective.