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water. Next generation theory is not contradicted because it describes cash flows only. It treats all growth at the collective scale as free and exogenous. Testing Next Generation Theory The proxies for the pure consumption rate (Schultz’ pure consumption over total capital) in security markets would be dividend yield for equities, and interest for debt claims. Ibbotson Associates’ SBII (2012), Chapter 4, shows average real interest on U.S. corporate bonds as 3.0% over the period 1926-2011. Real corporate dividend yield rate over the period can be estimated from the same source at about 2.9%. Jeremy Siegel’s Stocks for the Long Run (2002), Table 1-2, reports data extending back to 1802. Real return over the period 1802 - 2001 is shown as averaging 3.5% for long-term governments, and 2.9% for short-term governments. Corporate bond returns would have run somewhat higher. Global Financial Data shows stock market information for 95 countries. Data for U.K., U.S., Germany, Australia and France begin from 1701, 1801, 1870, 1883 and 1896 respectively. My charts and tables, and my website Free Growth and Other Surprises, show this information along with evidence for free growth. The eighteenth century is represented by U.K. alone. U.K. then showed real price return, dividend yield and total return at 21.4%, 7.9% and 29.3%. Volatility of dividend yield was exceptional. From 1801 forward, U.K. averages for these flows were 2.2%, 4.2% and 6.4%. U.S. figures from 1801 forward were 2.9%, 5.3% and 8.3%. Global Financial Data also shows collective flows for Europe and the world since 1926. Here the figures were 3.3%, 3.9% and 7.3% for Europe, and 3.5%, 3.8% and 7.3% for the world. Modeling of the pure consumption rate before the emergence of security markets could refer to the history of interest rates alone. Interest is rate of return to senior claims. Rate of return to any claim is realization by investors net of all expense. Chapter 7 Petty’s Idea 2/3/16 25 HOUSE_OVERSIGHT_011084