Chapter 7: The dangers of Keynesian economics
In sharp contrast to the private sector, where firms will go out of business if revenues do not cover costs, most government spending is not value-adding. That is not of itself an argument against public spending,but it is an argument against thinking that when governments spend they are necessarily helping the economy grow. The belief that public spending is good for growth is the largest fallacy associated with modern macroeconomic theory. Being unable to tell the difference between welfare and wealth creation is possibly Keynes’s most lasting legacy, a legacy which has been poisoning public policy since the 1930s.
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