In a recent engagement with fellow economists on the role of monetary policy in boosting economic growth, a colleague advanced the familiar argument that the rate of return on capital (r) is greater than economic growth (g) and lamented that the Reserve Bank has kept policy rates way too high and made it too costly to fund investment. The argument then follows that the Bank must depress long-term interest rates to reduce the cost of funding for the state and investors. But this reasoning misses the most basic economic principles...