Return-on-Capital Rate is Typically Greater-Than Economic-Growth Rate Proposition
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A Return-on-Capital Rate is Typically Greater-Than Economic-Growth Rate Proposition is an economic proposition that return-on-capital rate is typically greater than the economic-growth rate.
- AKA: [math]\displaystyle{ r \gt g }[/math]
- Context:
- Supporting Evidence:
- it was true for thousands of years prior to World War I.
- Contradicting Evidence:
- it has been false for the past 100 years, since World War I.
- Supporting Evidence:
- See: Savings Rate, Capital/Labor Substitution Elasticity.
References
2014
- (Piketty, 2014) ⇒ Thomas Piketty. (2014). “Capital in the Twenty-First Century." Harvard University Press. ISBN:9780674369559
- QUOTE: To sum up: the inequality r > g has clearly been true throughout most of human history, right up to the eve of World War I, and it will probably be true again in the twenty-first century. Its truth depends, however, on the shocks to which capital is subject, as well as on what public policies and institutions are put in place to regulate the relationship between capital and labor.
- The Economist Explains. (2014). “Thomas Piketty’s “Capital”, summarised in four paragraphs." The Economist May 4th 2014.
- QUOTE: ... From this history, Mr Piketty derives a grand theory of capital and inequality. As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. ...