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Monday, March 11, 2013

Spending for investments and spending for consumption

This article by Prof. Jeffrey Sachs takes issue with the message of Prof. Paul Krugman (et. al.) that 'spending, spending, spending' is now called for; even unqualified spending as long as it increases aggregate demand.

Prof. Sachs' message is quite different. He, too, supports spending at this time but he says about the US that 'I have been against temporary tax cuts and temporary spending programs, believing that instead we need a consistent, planned, decade-long boost in public investments in people, technology, and infrastructure'.

I am always amazed that when European economists talk about spending these days, they never qualify it by separating between spending for investment and spending for consumption. Greece would be such a good example of the importance of the difference between the two: if Greece had only spent a significant part (not even all) of the debt which entered the country since the Euro on qualified investments, Greece would today not be in the dramatic situation which it finds itself in.

2 comments:

  1. To be fair, here is a blogpost which takes Jeffrey Sachs' article apart.

    http://economistsview.typepad.com/economistsview/2013/03/crude-sachsism.html

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  2. Theories of economic growth are many, enough interesting is the endogenous derived from Greek (ενδο-γε-νής) which means it is created from internal effort "forces" of an economy, if we talk about economy. This growth theory, developed in detail by Britons like Peter Howitt.But truly it's quite difficult for me to calculate a measurment for spending. But spending for an investment is of great importance.

    MS

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