Capital in the Twenty-First Century

by Thomas Piketty

To my way of thinking, the inequality r > g should be analyzed as a historical reality dependent on a variety of mechanisms and not as an absolute logical necessity. It is the result of a confluence of forces, each largely independent of the others. For one thing, the rate of growth, g, tends to be structurally low (generally not much more than 1 percent a year once the demographic transition is complete and the country reaches the world technological frontier, where the pace of innovation is fairly slow). For another, the rate of return on capital, r, depends on many technological, psychological, social, and cultural factors, which together seem to result in a return of roughly 4–5 percent (in any event distinctly greater than 1 percent).