![]() ![]() He concludes this work suggests the Keynesian view is likely wrong, but people should do more of this type of work and continue investigating the issue. ![]() ![]() However, this fact has not stopped people from making policy decisions on the basis of Keynesian views.įriedman looks at real data about the effects of government spending. Friedman argues while there are extreme conditions in which this view would be true, these conditions have been and continue to remain extremely unlikely. The general idea behind Keynesianism is that every dollar of government spending creates significantly more than a dollar of increased income for private individuals and groups. Throughout the chapter Friedman discusses the specific conditions under which a Keynesian view about the effects of increased government spending would be true. In short, Friedman portrays government spending as a clumsy tool, which should rarely be used. Further, governments do not usually decrease their spending once the problems that prompted the initial spending increase are resolved. Instead, Friedman states government spending increases come into effect too slowly to fix any problems. The prevailing view Friedman rebuts is that government spending can be a responsive and accurate counterbalance to instability in a country's economy. ![]() He argues increases in government spending do not generally lead to economic growth and expansion, contrary to what the prevailing opinion was in the period after World War II (1939–45). Friedman shifts from a focus on monetary policy to fiscal policy. ![]()
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