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Good article. One thing I've always wondered about the idea that profits would be competed away to zero is: What about competing uses for capital? If invested capital can't earn a market rate of return in some business, then won't it move elsewhere? So it seems that in the long run the floor for profit is not zero, it's whatever gives you the market ROI. Thoughts?

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The price is set by the marginal asset, so it's always a question of the difference between the marginal and each inframarginal. If the capital is literally a dollar, your dollar and mine are pretty similar. Neither will earn a profit. But if there's some knowledge implicitly earning a return, things may be different. I can't directly charge for my knowledge about what's a worthwhile investment so they way I earn that return is by bundling my knowledge with dollar and earning a joint return. I convey my knowledge by what I'm willing to invest in

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Love this! I was literally just yelling about this because I need a new mattress and pillows and there are too many slightly differentiated products on the market. I wish it was as easy as econ 101 made it out to be.

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