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PKSG Working Paper Series

Working Paper PKWP0903

Keynes and the financing of public works expenditures

March 2009

Geoff Tily

The argument for public works in the 1930s went a good deal further than that of the present day. Keynes and others were concerned with not only the impact of the multiplier process on aggregate demand, but equally with the implications for financing the expenditure. Their conclusion was of the utmost importance: that spending would pay for itself and would not ‘crowd out’. The aim of this brief paper is to restate this argument and to clarify other misconceptions about Keynes’s theory and the associated practical conclusions. Empirical data are examined to show that these conclusions were supported by outcomes

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