-There's no money in our example and that's why "interest" can go to zero. In fact, one could say that there's no such interest but a sharing of profits.
The basic interest of money doesn't ever goes to zero, no matter how little the growth is. Interest stays there even within a recession.
We could easily introduce money in the story, there is just no need because there is only two goods at a time.
-Within capitalism, the nets would need to yield at least as much as "money does", taking it first from profits and then from wages. The production of nets would have stop when that yield is compromised (until some nets break or the tribe gets bigger) instead of when the demand is met. In your example, there's free market but there's no capitalism.
Exactly! In a developed economy where nets are invented, the return of producing nets must be higher than the return of money. This however means it has to be sufficently profitable compared to producing OTHER goods. So you can always break down the whole time preference thing to production and goods. Money is just the medium of exchange. Prices reflect barter rates, interest reflects growth.
But in general, yes, it seems that the liquidity premium gets higher when there's very profitable investments to make.
On the other hand, after the initial profits move to wages, people can save more, decreasing the basic interest.
Yes, thats the point. In my fishexample interest in fact goes to zero, because there are no other goods than fish and massages and no more options to grow.
If you imagine the - highly hypothetical - situation when there is no economic growth (on average) in the whole world, what is going to happen?
Let there be a few companies that still make profits while the rest of the economy stagnates. All companies which are not growing will pay back (or already have paid back) there debts because paying back means say 4% profit (avoidance of loss) compared to 0%. So there is almost noone borrowing money so interest will be very low.
The last few companies growing can now very quickly and cheaply get money at the market and max out their growth potential. De facto, the stock prices will go up almost infinitely to take the low interest into account, and the companies can easily issue stocks for high prices. After this short phase, the whole economy would on average stagnate. Of course there are wages, depriciation etc BUT there is no need for a money market. You still need money for trading and stuff but you dont need loans and savings at bank so there would be no interest.
In this admittedly hypothetical situation, I can't see how "at least little interest" can remain. In reality we would, if at all, come close to zero, because there alway is some fluctuation (population growth and demographic changes, changes in education, nature and of course bernanke and the chinese.
On the other hand, if one accepts the hypothetical situation, he could also accept a few meaningful statements like:
- A certain amount of economic unequality is temporary (this somehow is a constant situation, but the inequality of industralisation was the reduction of poverty today and the inequality of the internet age is tomorrows reduction of poverty)
- This part of inequality is somehow "fair" and does not harm anyone (except the coachman who can easily switch to driving a car within some weeks)
- Every attempt to intervene at that part of inequality (regulations, intellectual property rights, minimum wages) prolongs the process that the current inequality wave(s) benefit to fight tomorrows poverty
I even want to try a really provocative statement:
Besides this cause of inequality, most inequality is caused by the state (or other mafia-like institutions like the mafia or warlords)