A couple of questions related to this, not directly relevant but I’ve been wondering about them and you might know something:
How to square interest rate = return on capital with the fact that, for most of human history, the growth rate was close to zero and the interest rate was significantly higher?
How does this account for risk? The (risk-free) interest rate is risk-free, and the return on capital is risky—it fluctuates over time, and sometimes it’s negative. So shouldn’t the growth rate be higher than the interest rate? (I think the long-run real growth rate is usually higher than the real interest rate—about 1–2% and 0–1% respectively IIRC, which might be the answer.)
A couple of questions related to this, not directly relevant but I’ve been wondering about them and you might know something:
How to square interest rate = return on capital with the fact that, for most of human history, the growth rate was close to zero and the interest rate was significantly higher?
How does this account for risk? The (risk-free) interest rate is risk-free, and the return on capital is risky—it fluctuates over time, and sometimes it’s negative. So shouldn’t the growth rate be higher than the interest rate? (I think the long-run real growth rate is usually higher than the real interest rate—about 1–2% and 0–1% respectively IIRC, which might be the answer.)