Abstract

The cost of capital, as an opportunity cost, is of wide applicability across microeconomics and economic policy. The concept is relatively simple; it is the return, implicitly an interest rate, on the next best risk-free investment. An alternative is the global marginal productivity of capital, assuming that capital markets are efficient. It equates to the world growth rate. However, several factors cloud what this figure is. This paper formulates a novel method to estimate the opportunity cost of capital, ex post, and applies it in a challenging industrial case study; namely to the fishing fleets of 19 OECD member states, whose results and attendant inferences are discussed.