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Emphasize Investment, Not Consumption

Nations can boost their economies more over the long-run by channeling their funds toward investments rather than attempting to boost consumption. In other words, countries must recognize empirical evidence indicating that the multiplier effect from money channeled toward investments is greater over the long-run than the multiplier effect for money channeled toward consumption. At the Keynesian Endpoint it is imperative for nations to increase the multiplier effect of every unit of currency they deploy because they have no new money to deploy.

By emphasizing investment over consumption, nations can boost their productivity and in doing so raise their standard of living. Keynes himself, in an era of depression and at a time when long-range economic forecasting was, because of a lack of empirical data and economic theory, in its infancy, fully appreciated the importance of productivity:

  • From the sixteenth century, with a cumulative crescendo after the eighteenth, the great age of science and technical inventions began... What is the result? In spite of an enormous growth in the population of the world...the average standard of life in Europe and the United States has been raised, I think, about fourfold... In our own lifetimes...we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.5

Emphasis on investment should include government support for research and development, as well as education, training and retraining for both the unemployed and the under-employed (discouraged workers who have dropped out of the workforce and those working part-time solely because they can’t obtain a full-time job), and productivity-enhancing infrastructure projects, including those that create more efficiency with respect to energy consumption and immigration laws designed to boost intellectual capital.

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