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'r' is the rate of return of capital, 'g' is the rate of growth of the economy. If 'r' is greater than 'g', than money continuously invested with a rate of retu
by danielweber 13y ago
'r' is the rate of return of capital, 'g' is the rate of growth of the economy. If 'r' is greater than 'g', than money continuously invested with a rate of return of 'r' will grow faster than 'g', by definition.
Using these definitions of r and g,
How can the return on capital exceed the growth of the economy in the long term?
If the return on capital is so good, governments should invest their pension funds in the stock market and then sit back and relax while all the free money pours in.