>Christian A. Gregory wrote:
>
>>What needs explanation is the inability of fiscal spending--even such as it
>>is--to stimulate demand.
>
>One problem may be what they spend money on - pointless
>infrastructure projects, bridges to nowhere, etc. Japan is woefully
>under-housed, isn't it? Why don't they subsidize better housing?
>Anyone know?
>
>Doug
I don't understand this. The multiplier effect on demand is supposed to obtain no matter how pointless the government ordered production. To take two famous examples from Keynes himself that are in the Darity and Galbraith macro textbook:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well tried principles of laissez faire to dig notes up again...there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably be greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing. p. 129
Indeed Keynes would argue that great periods of prosperity in economic history, from the ancient Egyptians to the middle Ages, derived from a now anachronistic extravagance in public investment that had multiplier effects:
Ancient Egypt was doubly fortunate, and doubtless owed to this its fabled wealth, in that it possessed two activities, namely pyramid building as well as the search for the precious metals, the fruits of which, since they could not serve the needs of man by being consumed, did not stale with abundance. The Middle Ages built cathedrals, and sang dirges. Two pyramids, two masses for the dead, are twice as good as one, but not so two railways from London to New York. p. 131
yrs, rakesh