Promote goals that lead to sustained investment. Government has a vital role in shaping the goals of investors, managers, and employees through policies in various areas. The manner in which capital markets are regulated, for example, shapes the incentives of investors and, in turn, the behavior of companies. Government should aim to encourage sustained investment in human skills, in innovation and in physical assets. Perhaps the single most powerful tool for raising the rate of sustained investment in industry is a tax incentive for long-term (five years or more) capital gains restricted to new investment in corporate equity. Long-term capital gains incentives should also be applied to pension funds and other currently untaxed investors, who now have few reasons not to engage in rapid trading.