Reply To: Capital goods and interest


The productivity of a land site or a capital good (or a labor service) determines its price along with the revenue generated by output it produces. The price of a factor of production conforms to its MRP.Investment by entrepreneurs to buy factors of production, however, earns only the rate of interest. Entrepreneurs pay DMRP to buy factors (sooner) and receive their MRP when selling the output (later).

What Rothbard is referring to is the distinction between factors of production that exist in nature, which are land and labor, and factors of production that come into existence through production, which are capital goods. Neither land nor labor needs to be produced to come into existence, so they have gross physical productivity. But capital goods must be produced to come into existence, so they have only net physical productivity. As shown above all factors of production have only net monetary productivity, i.e., investment in them earns only a net return, which is the rate of interest.