Reply To: Lord Keynes


Keynes argued for running budget deficits in recessions so that government expenditures, by making up for sagging private expenditures, restore aggregate demand to a level that renders full employment. He did not favor running permanent budget deficits, but only as long as and as large as needed to restore full-employment aggregate demand.

He also argued that to prevent depressions, the government should socialize investment. In that way, it couldn’t collapse from private investor pessimism.