Turns out some public spending encourages private investment

Tuesday 3 December 2019

Hoocoodnode? Via FTAlphaville:

If you’ve had the misfortune of having to learn economics, you may remember the theory of the “crowding out effect” from your studies.

Popularised in the 1970s, the idea is that an increase public sector investment, and therefore borrowing, has the rather undesirable effect of displacing the private sector’s planned borrowing and investment.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.