The two growth rates indicated by Piketty are “economic growth rate (g)” and “return-on-investment ratio (r).” The economic growth rate (g) indicates the increase in national income, while the return-on-investment ratio (r) indicates the percentage of income derived from capital (assets). Piketty noted that when “r > g,” wealth inequality increases.
What is the specific value?
The specific values that Piketty presents in Capital in the 21st Century are as follows:
Economic growth (g): 1-2%.
Return on capital (r): 4-5%.
This leads to a situation in which the rate of return on capital outpaces the rate of economic growth, and those with assets accumulate wealth at a faster pace, leading to widening inequality.
For venture capital (VC) investment returns, 2023 data show that the 10-year internal rate of return (IRR) averaged around 13%, but grew by only 0.4% in the fourth quarter of 2023. This was the first positive growth rate since 2021.
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