Chapter Fourteen: The role of big government
Abstract
Following the approach of Domar, that was updated by Vatter and Walker, this chapter argues that the supply side capacity effects of investment can exceed the demand side multiplier effects on aggregate demand and lead to secular stagnation. In addition, following the work of Minsky, investment-led growth tends to produce both financial and price instability. For this reason, the “big government” needs to play a bigger role in maintaining sufficient effective demand. However, rather than promoting “Keynesian pump-priming” or countercyclical spending, ...
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