we don't have a free market, it's highly regulated

It invalidates their point because what’s stopping you from saying say “you can be outcompeted by someone willing to work 168 hours a week.”

it’s not diminishing positive returns. Eventually you work so much the returns go negative.

According to you it doesn’t matter if on the 49th consecutive hour the worker is basically dead and unable to come into work the next week. Overwork leads to loss of productivity and possible negative outcomes for the business if mistakes happen because of exhaustion.

In the real world there is probably some equilibrium for maximizing productivity vs hours work vs supply of workers capable of working those hours to that quality consistently.

Actually, that isn't true. The marginal output of working more than about 40 hours per week turns negative after about 4 weeks of doing so. There's plenty of research on this.

https://ericdodds.com/research-and-the-realities-of-time-wor...

That doesn’t consider the greater picture and all the costs.

If the harder worker becomes dissatisfied sooner and leaves the position sooner than the worker putting in fewer hours, that increased employee turnover will result in lower company productivity and higher overhead.

The net result may be far worse.