I’m out in Sin City for the annual FreedomFest conference, where I moderated a debate earlier today on whether consumer spending or investment spending was the key to economic growth.
As you can imagine, it was horribly painful for me to keep from injecting my two cents in the discussion, so I figured I would rant and rave a bit on the blog.
To be succinct, consumption is the ultimate purpose of all production, so there certainly is nothing wrong with consumer spending. That being said, investment (capital formation) is one of the most important determinants of economic growth.
The Keynesians would respond by agreeing, but then arguing that sometimes the economy falls into a ditch and needs a “stimulus.”
That’s a well-intentioned sentiment, but the traditional Keynesian prescription of deficit spending doesn’t work.
If I had the chance to participate in the debate, this video captures what I would have said about whether Obama’s so-called stimulus was a success.
