My latest Mises CA responds to a reader who thought he had discovered a contradiction in Rothbard. An excerpt:
Notice that in this outcome, it is still true that an entrepreneur earns a “surplus” on the inframarginal units. However, such an entrepreneur is starting out with a bunch of fixed costs (based on other expenditures necessary for the operation), and by optimizing the amount of units to buy of the particular factor under examination, the entrepreneur is simply reducing his loss down to $0. For example, holding all other expenditures at their optimal amount, and starting with 0 units of labor, the entrepreneur might suffer a loss of $1 million per year. Then if the entrepreneur hires 1 unit of labor at $10/hour, where that first worker has a MVP [marginal value product] of $20/hour, then for a 2,000 hours / year work schedule, the loss now drops to ($1 million – $20,000) = $980,000 per year. The marginal benefit of hiring each new worker exceeds the marginal cost, meaning that total profit increases, up until the point at which the last worker hired just pays for his own wages. At that point–if we’re in a long-run equilibrium–the loss has been whittled down precisely to $0.