By Phelps, Edmund

Journal of Government and Economics Vol. 5 (Spring 2022)

Date Published: Spring 2022

Abstract

When a governmental crisis subsides, citizens are apt to wonder whether all the deficit spending is going to cost something. This situation is the subject of wildly differing views. Which view appears to be most nearly right? The Keynesian view that public debt serves to pull up employment, thus reducing the unemployment rate and inducing higher participation? Or the neoclassical view that public debt sets the capital stock onto a lower path, thus decreasing the labor force and employment?