As we have seen in this subsection, the earnings of producers are affected by their relative skill in anticipating consumer demand and other relevant market conditions. These earnings, in other words, include a speculative element, which may be either positive or negative. We must therefore add this final element to the determinants of the return on investment (cf. p. 4.9:8):

Investors (capitalists) earn:
  • the market interest rate; plus
  • a premium just sufficient to compensate them for the marginal disutility of the risk incurred by their investment; plus
  • a profit or loss reflecting their comparative success or failure in anticipating market conditions.

The first two of the above elements determine the investors' expected earnings, i. e., their earnings insofar as they can be predicted. The three elements together determine what a given investor will earn from one particular investment.      Next page
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