In Support of Keynesian Theories Executed Right

Copied and Pasted comments by me on Economist Debate entitled: "This house believes that we are all Keynesians now."

pennameinuse wrote:

I think that fundamentally the role of Government in Economy is to purchase for the people items of common good which benefit the majority yet being too expensive for private entities(e.g. utilities, infrastructure). IF the Government operating under Keynesian policies spend wisely on infrastructure and utilities, the competitive advantage afforded to productivity will pay due dividends. However if the Government squanders taxpayer money through corruption and white elephant projects, obviously there is no benefit to the greater good. Hence, it can be said that the Keynesian policy works when it is executed right.

Opponents of the Keynesian policy would hurry and say: "But the Government NEVER gets anything right! We should let the market decide!" Adam Smith's invisible hand guarantees that all market participants act for their own good. Who then would provide the nation with highway infrastructure, water infrastructure, and technology infrastructure? These projects are too expensive for most private ventures, and are too important as a public good that only Government has the resources and mandate to execute them. Hence, Government spending IS crucial to the economy, hence, Keynesian policies ARE correct. The crux is that the Government spending MUST be directed at projects that contribute to the greater public good to have a positive impact on the economy.

The reason why Government spending is crucial is due to the phenomena highlighted in the Tragedy of the Commons. For public goods, such as infrastructure and utilities, everybody benefits, yet there is no particular individual entity that has sufficient resources to bear the risk and costs. Hence an anti-Keynesian anti-Government spending approach simply would not be viable for the competitiveness and productivity of the nation. If Government does not spend on infrastructure and other public goods such as education, then the nations competitiveness and productivity as a whole will be impeded, directly stunting its economic growth.