We need to think more carefully the consequences of a permantent r-g+rp<0 for asset valuations. We have no framework for that regime. Concepts such as solvency or "liquidity" (whatever that means), let alone resource constraints, vanish.
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Counterpoint - we don’t need to think about this because rp is just the number that you plug into a valuation formula (given r and g) to make the sum of discounted cash flows equal the current price. With that point of view it’s impossible to have r-g+rp<0
anyway-
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I was replying this, yes, actually r is unobservable as well. Tons of estimation issues, many papers. My point is conceptual rather than practical. Meaning that the analytical apparatus becomes obsolete in a framework in which constraints don't hold.
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For r don’t you just use the risk free (ie treasury) discount curve and stick everything else into rp? It seems like the least controversial part of the whole model (ok you need to extrapolate past 30y but...)
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