> That's nonsense. It's not just businessmen that compete for consumer's money. Consumers compete for businessmen's money as well.

I wrote "if", and then provided a citation that the clause is false.

> Suppose a widget-making enterprise made 3% profit on it's capital. What's the sensible thing a widget maker should do? Obviously, fire his employees, sell or scuttle his machines, turn everything into cash and turn the cash into 4.313% treasury bonds.

This seems to be even more of a flawed toy model as the words of mine which your complaining about.

Even assuming that's the same period so these are equivalent (3% per sale but you make a widget in 4 hours and sell them just as fast is much more than 4.313% per year): Why does a treasury bond earn interest in the first place? How does the government cover this cost?

The usual answer to the latter is "the bond is to raise money for a thing the government wants to do, in order to boost the economic output of the country, thus future taxes pay for it". If they set the interest rate so high that everyone laid off all their workers, this would not be effective, so a government would not do it.

You also suggest they may sell their machines: to whom? If everyone is doing this, there is no market to sell to.

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Now consider: an investor has investment opportunities of 2% and 3% return. The economic choice is 3%, you are a widget maker promising this, they invest in your business.

Your competitor knows your profit margin and your costs, they know that if they can make widgets at the same cost then they can charge 3% and get a share of the same customers… except that both producers have fixed costs as well as per-widget costs, and the market size is not in their power to change.

The competitor's options:

1) Continue to compete at the same profit margin

2) Undercut your prices: if all the customers are perfectly rational spheres in a vacuum, then they will immediately switch supplier even with an infinitesimal price reduction, significantly increasing their sales at the cost of yours

3) Increase their prices in order to promise a higher return on investment to their investors — but they know that if they do this, homo-economicus customers will all reject their widgets in favour of yours, and that their business will therefore earn nothing, and they know that their investors know this too

4) Leave the market entirely, potentially allowing you to become a monopoly and raise your profit margin (to maximise their options within the supply/demand curve limits)

Option 2 is the game theoretic choice on any given round, but it's not a one-shot game and you as the original widget company get to respond before running out of money. The whole thing is symmetric, so you tend towards no profit even though you'd like to collude because it's a prisoner's dilemma payoff matrix.

This is also symmetric with regard to different industries, so switching from widgets to gadgets in order to boost return on investment merely changes the players and not the, ah, game.

What slows this process down includes, but is not limited to (because I'm not an economist):

1) Customers aren't perfect spheres of economic rationality

2) People don't know all their price options

3) People are lazy

4) Your costs aren't likely to be exactly the same as your competitor's costs

These[0] reasons are why markets aren't efficient.

[0] and I would hope many other things, because otherwise this topic is simpler than I expected