[jmoak]

This seems to have proven that growth leads to higher earnings and equity prices.

Of course less taxation and a drop in interest rates will lead to more earnings over time and higher valuations. The crux is that he frames the drop in interest rates as a matter of "luck", as if the government just happened to be dropping them, as opposed to the government reacting to the drop in good/service prices by lowering rates, as a result of innovation, to maintain price stability and the 2% inflation target.

Company A makes more of Good #1 for less money due to Innovation X, and can charge less money. When this occurs across the entire economy, the fed has to drop rates to prevent broad deflation in prices. Lower rates show up as more earnings. The alternative with fixed rates would be that Company A's revenue, after its impressive innovation, would remain roughly the same (or fall) while its competitors' revenues fall (more). The real (adjusted) growth in equity prices, earnings, and revenue would still be going up at the same rate IMO.

It's entirely possible (maybe not likely) that a landmark innovation could deflate prices for most goods in the future and bring us back to low or even negative rates, which would (per his measurements) show up as higher earnings and equity prices.

Maybe I don't know what I'm talking about, but this paper seems circular to me. What would be more compelling is an analysis on the future of goods/services availability, as interest rates and taxation are downstream of those. For example, what does China's potential decline forebode for good availability? What about the hyped up potential panacea of AI?