Re:naivequestion &back to Social Expenditures JMKquotes

[galarza@xxxxxxx (Enrike)]

Hi PKTers,
I read the digest so I may have missed some messages.
JMK's views on the tight monetary and fiscal policies of GB govt
(Activities 1931-9, Coll. Wr. vol XXI) (excerpts from a letter to a
newspaper sent by MacGregor, Pigou, JMK, W. Layton, A. Slater and
J.C.Stamp)

<We are told that the vital thing to do at the present time is to
'concentrate such resources as we have upon works that are absolutely
necessary, or which, when completed, will give the maximum employment';
while expenditure now upon libraries, museums, and so on 'must inevitably
reduce the funds avalaible when confidence returns'....It seems to be
thought that there exists a stock of stored-up wealth the amount of which
is fixed independently of our action and which we can only employ in
setting people to work now, on pain of having less of it avalaible to set
them to work later on. This conception, though since its burial by Adam
Smith it has enjoyed many resurrections, is an illusion. The resources out
of which workpeople and all other persons are paid in any year consist
almost entirely of what is produced ......by the brains, hands, and capital
equipment of the country. In so far as this labour and capital are idle,
the resources avalaible for paying income to their owners are not
conserved; they simply do not come into existence.> p. 140

I think it would be fair to understand Social Security instead of (in
addition to) museums or libraries.

Spending (consumption or investment) is not a transfer of income but a
destruction of it. After spending you have less goods and services to sell
and (identically) less money income to spend. Spending is a payment that
decreases incomes. It is true that for the part of profits there is indeed
a transfer from the buyer to the stockholders (present or future
proprietaire), but profits are always spent, either in consumtion or
equipment by either stockholders (firm's manager in their name) or
borrowers (financial bankers job). In the aggregate, then, there is no
choice between spending and saving.

Enrike Galarza
Ekonomia Saila
Nafarroako Unibertsitate Publikoa
galarza@xxxxxxx
FAX: 34-48-169404