rate of return on capital

christian11 at mindspring.com christian11 at mindspring.com
Wed Apr 17 13:20:32 PDT 2002


On Wed, 17 Apr 2002 14:34:15 -0500 Carrol Cox <cbcox at ilstu.edu> wrote:


>I tossed out a pure hypothetical, formulated loosely:


>Given that that the return on actual investment is as you say, what would happen if what little investment there _was_ in the undeveloped
world were shifted to home investment.

As long as the marginal return on investment in the developed world > marginal return in LDCs > 0, there is no reason to repatriate all investment to developed world--in fact, just the opposite. If capitalists took all of the investment in LDCs and siphoned it off to the "developed" world, they would stop investing when that rate of return reached the rate of LDCs, not when it reached zero. The incentive to invest in LDC's is "rational" in that sense because it is more productive on the margin than "developed" country investment, beyond a given level. In that sense LDC investment is more of a income buffer than a source of huge profits.

Christian



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