Your very good article in the latest LBO left me perplexed on one issue. I hope I am not too punctilious. But, you say that it is *true* that the *average* 30-year "look back" return on the stock market is 6%, with wide variations. But then you later on question how anyone could expect that stock market (as a whole) to exceed in its returns the growth of the economy, i.e., if economic growth is 3%, so too ought to be the stock market's.
But it seems to me that the *average* annual economic growth for the period you graphed is *lower* than 6%. In other words, the history you gave seems to indicate stock market returns have historically exceeded gnp growth.
I can think of any number of possible reasons. For one thing, it may be that a weighted average of debt and stock returns would more likely reflect gnp growth than just stock returns. But there are kazillions of possibilities. So I'd like some illumination, because I'm feeling benighted. -gn
-- Gregory P. Nowell Associate Professor Department of Political Science, Milne 100 State University of New York 135 Western Ave. Albany, New York 12222
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