I don’t really follow the reasoning here. It says "changes in technology lead to increased saving and investment, which cause the capital per labor hour to grow and THE REAL RATE OF RETURN TO FALL. When the real return falls to the target rate of return, economic growth stops. My question is, why does capital per labor hour growing cause the real rate of return to fall?
diminishing return on capital
Another way to look at it is if more capital floods the market, that will make capital cheaper and drive down rates of return.
There’s a negative correlation of investments and real interest rates
Supply/Demand baby… Supply of capital more… capital is less valuable as measure by real rates.