There is no such thing as unearned income

[Kulindahr]

Now let’s revisit Return On Investment.



How much ROI will I derive by investing in a widget-producing machine if I store it idle in my garage?

What is the most important influence on ROI between using the machine (capital investment) in a business enterprise and holding it in reserve?

And more importantly, is it reasonable to regard the widget-producing machine itself (e.g. resource) as a form of wealth?

Whether you get a ROI merely by buying the machine will depend on market conditions. In general, merely by having it you will get no return, but if it's a new machine and suddenly lots of people want them, you may be able to sell at a profit -- but conversely, if suddenly the machines aren't as useful because widgets have dropped in popularity, you'll actually have lost money.

If you only bought one, then an idle machine brings you zero return, while using it will bring you whatever the value of widgets is. OTOH, if you bought a dozen and are using eleven, if one breaks down the idle one can step in and save your production.

The machine is definitely a form of wealth, though its value is dependent on the demand for widgets.

 

[Benvolio]

The value of the machine depends on the market value of the machine itself, which will not be directly dependent on demand for the widgets.

 

[ruivinho]

Anyone who saves money to start a business, employ others and make a profit is necessarily receiving money he did not earn, and yes, he is profiting from the work of others. But the alternative is government ownership, and then the bureaucrats live off the labor of others.

Anyone who saves money is abdicating consumption in the present. Doesn't that require an effort? Just because it is not a tangible effort, does not mean that it is less worthy. Furthermore, the workers are only able to produce because that person saved money in order to own the capital. So he is profiting from the work of others, and the others are profiting from his capital.

(Of course, if we talk about inheritance that's a whole other issue.)

 

[ruivinho]

No, there is really no difference in a manager reporting to the shareholders through their appointed Board, or a bureaucrat reporting to the electorate through their appointed Government. Bureaucrats, like managers, contribute something of value in exchange for their paycheques.

Yes there is. The electorate has much less control than the shareholders. Even in nowadays' world with companies owned by a lot of agents, there is usually some bigger shareholders who have a bigger and more direct influence than any electorate will have on a Government.

Furthermore, there is a time constraint in the Goverment - it cannot be fired so often. Even more so, a Government is usually a whole package, you can fire a manager from firm 1, and keep the manager from firm 2,3,4 etc., but if the Government controls both firms you have to either keep them all (re-elect them) or fire them all (not re-elect them). So a Government ownership centralizes the process in such a way that it creates many more constraints preventing its proper efficiency.

 

[xbuzzerx]

Yes there is. The electorate has much less control than the shareholders. Even in nowadays' world with companies owned by a lot of agents, there is usually some bigger shareholders who have a bigger and more direct influence than any electorate will have on a Government.

Furthermore, there is a time constraint in the Goverment - it cannot be fired so often. Even more so, a Government is usually a whole package, you can fire a manager from firm 1, and keep the manager from firm 2,3,4 etc., but if the Government controls both firms you have to either keep them all (re-elect them) or fire them all (not re-elect them). So a Government ownership centralizes the process in such a way that it creates many more constraints preventing its proper efficiency.

Interesting. Also, I'd throw in with this and say that the pressure, even if it requires doing things that may be unsustainable or even counterproductive long-term, is greater with corporate leadership to show short term (quarterly) profit. If a particular CEO or board is under pressure to constantly show maintained or increased profitability, they're not going to do something like have corporate offices all install solar panels at a large initial investment which would provide lower costs and more profit within 20 years.