VOX – CEPR Policy Portal, 02 January 2o18, by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor
The rate of return on capital plays a pivotal role in shaping current macroeconomic debates. This column presents findings from a new dataset covering returns of major asset classes in the advanced economies over the last 150 years. The data offer new insights on several long-standing puzzles in economics, and uncover new relationships that seem at odds with some fundamental economic tenets.
Asset returns occupy a special place in the history of economic thought. From John Stuart Mill (1848) to Karl Marx (1872), the profession’s most influential thinkers have devoted much of their time to the study of interest and profits. Today, the rate of return on capital plays a pivotal role in shaping current macroeconomic debates.
Asset returns encapsulate fundamental features about an economy’s dynamics, such as attitudes toward risk and preferences over future consumption, demographic shifts in the share of borrowers versus savers, and the ebb and flow of inequality in societies. Understanding such features is critical in designing economic policy. “[…]”
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