MikeAmmonProfits

Mike Ammon
Okay, two-part question: When talking about the rate of return on investment are we talking strictly about the interest earned based on the length of production or time to be specific. And at final equilibrium is the mark up equal to the interest rate?

Reginald Livingston
Interest returns only come from time. Someone is paying you a premium to use your money now rather than have to build it themselves. Depending on what kind of investment you are making, there may be an entrepreneurial or speculative element, which would not factor as interest.
Final equilibrium, the 'mark up' (I'm guessing you mean profit?) would be equal to the value of interest plus entrepreneurship
The contribution to revenue from the factors always gets bid away.

Mike Ammon
Assuming we're in a free-market and entrepreneurial profit has been wittled down as a result of competing firms could the equilibrium price get to a spot where the only mark-up would be interest?

Reginald Livingston
No. At that point, and most likely before it, the amount of profit any entrepreneur generated would be less than the profits available to a wage laborer or a capitalist.
And so naturally those persons with entrepreneurial skill on the margin would reallocate their efforts accordingly.
Why compete in a brutally competitive market for a 2% return when you could loan out your money to other entrepreneurs for the same amount?

Mike Ammon
Great point.

Reginald Livingston
If all the entrepreneurs started to do that, the supply of entrepreneurial labor would go down until the price got bid up enough to reinstate entrepreneurial profits
The only world in which entrepreneurial skill yields interest only profits is a world with no demand for entrepreneurs.

Mike Ammon
Thanks, brah

Reginald Livingston
Np