Barkley, you believe that I have shifted the discussion. The discussion 
on this thread has been about government spending and has, until now, 
neglected how the spending was financed. You implicitly assumed that it 
was financed by the creation of new money. I implicitly assumed that it 
was not. Sorry for the misunderstanding. Before I started the thread, 
the list was already discussing Keynesianism and laissez faire. In a 
post just before the one that started this thread, I wrote the following:

"I would speculate that few noted economists today see public spending, 
by itself, as a means of avoiding recession; although many support it 
for other reasons. Most economists do not expect a recession so long as 
there is monetary stability and consistency in government spending and 
taxing policies. And, if there was a recession, most would not expect 
government spending financed by borrowing to reverse it. This leaves 
monetary policy; and few would advocate expansionary monetary policy, 
given what we know about the relationship between money and inflation."

I suppose that I may be sufficiently out of the Keynesian, or even the 
macroeconomic, loop not to realize that the clear distinction between 
Keynesian and monetary policy that used to be present during my school 
days has been blurred.

I certainly did not intend to mislead you about my definition of 
government spending and I regret that you were misled. I hope it is 
clear now that we have been writing about different things. So let me 
try to draw you out.

If I understand your theory correctly, you hold the following view. Let 
us compare two scenarios. In the first the government increases 
spending, which is financed by additional money. The money is first 
spent by the government on X. The recipients of the money then spend it 
again. The result is an expansion -- an increase in aggregate demand in 
your terms. In the second scenario, the central bank increases the 
quantity of money by exactly the same amount as the government spending. 
The bank gives the money to the same people who would receive the 
additional income from the government spending in the first scenario.

You maintain that the former is more likely to have an expansionary 
effect. This is true regardless of whether X is roads or SS training. 
Presumably, you would say that the increase in government spending is 
more expansionary than the increase in money is not.

Is this consistent with your views in the game you imply "we" are playing?


Regarding the Nazi regime between 1933 and 1936, I am not prepared to 
learn the history, although I think it is strange that you would use 
this case, for the reasons I described. There is a paper on the internet 
that seems to support my reasons. But I have not done the kind of 
literature search that would be needed to feel confident that your 
interpretation of the period is wrong.

http://www2.wiwi.hu-berlin.de/institute/wg/ritschl/pdf_files/ritschl_dec2000.pdf

The paper seems to have been presented at a conference and published in 
a Japanese journal in 2001.


Finally, regarding Andy Denis's point about the Keynes preface, perhaps 
there is something that you did not quote. In the quote, Keynes refers 
to a totalitarian regime, not to a command or even an administered 
economy. For a market economy, a totalitarian regime has an policy 
advantage over a democracy because it can easily more easily make and 
enforce laws. It seems on the surface that this is what Keynes is 
referring to. Do you know whether he meant more than this? If he did was 
he assuming that the German and British economies in 1933 were similar? 
Finally, if he did believe this, do you think he was right? Otherwise, 
why would you regard the quote as relevant?

Pat Gunning