Huh? In most usage I've seen, "return on capital" means on all capital, not just equity (and not just dividends on equity, which I think you are implying?). Bu

Huh? In most usage I've seen, "return on capital" means on all capital, not just equity (and not just dividends on equity, which I think you are implying?). But I'm not an economist, so maybe I'm misunderstanding you or the paper. In particular, returns on real estate or capital gains are certainly "return on capital". Are you saying otherwise? > It's not immediately clear that increases in productivity growth or increases in innovation would necessarily lead to increase in returns - because if everyone innovates, you won't be able to transform those into increased profit easily. I'm not sure I agree with that. I recall an argument (I can't remember who makes this) that as labor productivity decreases (i.e., cost of labor goes up relative to its returns), more money flows into capital investments, because (to take a factory example) lower and lower value capital investments now look attractive (relative to spending that money on more labor). So that suggests that as labor gets more expensive, return on capital may (on average) decline. That suggests in turn that if labor productivity increases, less money is invested in capital improvements, meaning on average return on capital increases. But that's a sort of funny way of arguing what I really meant, which is that there's a more direct causal relationship: capital investments result in labor productivity increases, which result in increased return on capital. That is, after all, the very rationale behind such investments.