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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (66685)	8/24/1999 12:03:00 AM
From: Michael Bakunin	Read Replies (3) \| Respond to of 132070

That's a fine thought experiment. While I have great sympathy for the basic position, it rests on several unproven assumptions, of which the least believable involves competition. When have we ever seen "all the positive results of productivity and efficiency improvement flow to the consumer"? Rarely, if ever. Indeed, most of the "great" companies of these times (e.g., Microsquash) are so precisely because they treat the consumer like real estate from which rents are to be wrung -- and make the consumer like it, or at least accede. Besides, where are the options grants for upper management? <g> -mb

To: Don Lloyd who wrote (66685)	8/24/1999 8:49:00 AM
From: Oblomov	Read Replies (1) \| Respond to of 132070

c. Profits will be at the low level of risk-free interest. Don, In general, the return on equity needs to be above the risk-free interest rate for capital to be employed at all. Otherwise, the capital would just be directed into less risky assets giving the same return. I would suggest that in your hypothetical economy, the risk free interest rate would be very low. AA

To: Don Lloyd who wrote (66685)	8/24/1999 10:00:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Don, It seems to me that if productivity growth is 10% the "real return" from equity ownership will be extremely high even though there is little or no nominal return. I think it could be inconsistent to have very high productivity in combination with low returns on capital. (though I'm not sure.) It would seem to me that there should be some relationship between the two as productivity improvements mostly come from new investment and the replacement of existing capital with better tools etc... If there IS a relationship then there should also be some leveling effect between the cost of capital and that high return. Everyone and his mother is going to want capital to invest to get those high real returns from equity ownership. Just my intuitive 2 cents. Wayne