Entrepreneurial Profit Is Not A Cost

[jay trotta]

Nelson's paragraph is lovely. I took three classes with him, and occasionally chat at the AI Chapter meetings. A book titled, "Go or No Go!" boils down the essence of the entrepreneurial spirit. The risk is all-in with no retreat and the stakes are high as the entrepreneur. There is no compensation for the owner of capital until completed. Even if the entrepreneur/developer is large enough to pay him or herself a salary it is still contingent on successful completion. They must have access to fungible and liquid capital. Time is also the enemy: the slow drip of entropy; supercilious fashions of market needs; the decay of the dollar; the conducting of a symphony of experts, vendors and laborers; the return on and off your capital. This is why it is not equivalent with the wages of a laborer. EI is a Factor of Production.

Instead of thinking of it as the "Cost Approach", it should be thought of as the "Factor of Production" approach. Labor (of which materials are labor already performed) + Land + EI (called "capital" by the classical thinkers). I therefore have to disagree with Mr. Bowes about calling EI a "cost"; EI is not a cost in the formal sense of a check written with an contractual outcome, but EI is definitely required.

As a spectator of this thread (interesting), my quotes on the Factor of Production comment......noted

 

[Eminent Domain]

I don't know if this is the article Stephen is talking about but it is Max Derbes discussing the topic.

https://professional.sauder.ubc.ca/re_creditprogram/course_resources/courses/content/330/11_Derbes - Rebuttal to Mann.pdf

I think this was a rebuttal to a rebuttal. The original article by Max J. Derbes was published in "The Real Estate Appraiser & Analyst" in Spring of 1990 and encompasses Pages 18 - 28. Then in the Winter 1990 edition of the same journal a Mr. George R. Mann offered a differing view point on Pages 44 - 48 which was immediately followed by the rebuttal you cited by Mr. Derbes on Pages 49 - 51.

I purchased several boxes of old journals from the family of a deceased MAI in St. Louis many years ago and remarkably these were included therein. Makes for some good reading. I also noticed an article on "Project Management Using Lotus 1-2-3". That's what I learned on in college and had not heard of that in decades. Man I am getting old.