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The assumption that public consumption is not expansionary is amateurish. A simple counterexample: wages in public education sector, i.e. INVESTMENT IN HUMAN CAPITAL, are classified as public “consumption”.
This simple accounting fact, routinely ignored in the debate, contributes to the explanation of these apparently “counterintuitive” results:
Another point is that, regardless of what most pre-Keynesian economists believe, demand and supply are NOT two distinct and separate worlds. Demand feeds back into supply, with some consequences:
Italy\u2019s first priority must be growth and employment - not fiscal consolidation per se. A fiscal stimulus might be helpful, IF spending is focused on those objectives, and not on public consumption. #in /1
— Marcel Fratzscher (@MFratzscher) October 19, 2018
https://t.co/zLDWBlF96U via @financialtimes
This simple accounting fact, routinely ignored in the debate, contributes to the explanation of these apparently “counterintuitive” results:
Another point is that, regardless of what most pre-Keynesian economists believe, demand and supply are NOT two distinct and separate worlds. Demand feeds back into supply, with some consequences: