Dr. Constantin Gurdgiev:

I have to disagree with what Dr. Kinsella has said. I believe the problem rests somewhere else. I do not see it as debunking the secular stagnation thesis, which goes way beyond demographics and there is much more to it than this. I sympathise with the problem as outlined, but I do not see Dr. Kinsella's suggestion as a solution. It is not just about taxation itself or taxation of capital alone. If we start with the 1940s and 1950s in the United States and Europe, the post-war capital base was effectively destroyed in Europe. When we start from a low base and introduce new investment in physical capital, the rates of return to that investment are very high, but as we keep building better factories and better roads there is a marginal decline in returns and productivity. In the 1980s and 1990s, when we began to experience this decline, we recognised it and continued to stimulate investment in physical and technological capital by lowering taxation rates. At the same time, we effectively created the disparity with the rate of taxation on human capital, in other words labour and wages, by introducing higher and higher rates of taxation on them. For me, the problem is not just about wages and capital taxation, but in the disparity between how government structures use taxation systems to incentivise the accumulation of physical and financial capital over and above human capital. This problem is entirely different, as is the solution to it. It is not about taxing capital more but about simultaneously reducing the gap between the taxation of labour and human capital, which are two different things although they are related, and physical and technological capital. It is crucial to distinguish between them because-----