Casey Mulligan is promoting the idea that Keynesians think consumption drives the economy. As I've explained here, I think this sort of claim demonstrates a big misunderstanding of the claims of Keynesianism. The worst thing is, there's a kernel of truth to it, insofar as the Keynesian perspective doesn't see increasing consumption as a problem. It's just treating the symptom, rather than the disease. So Keynesians don't go out of their way to oppose consumption-inducing policies because that would be counter-productive. However, that gives the impression to some people who don't take the time to think about it that Keynesianism is all about increasing consumption, when really it's all about increasing investment.
When I wrote the post that I linked to above about Keynesianism and consumptionism, I was largely inferring from theory. I did not have a passage in mind where Keynes said "investment is way more important than consumption you guys". I've come across such a passage, which is vindicating I think!
In chapter 22, Notes on the Trade Cycle, he writes:
"Practically I only differ from these [underconsumptionist] schools of thoguht in thinking that they may lay a little too much emphasis on increased consumption at a tiem when there is still much social advantage to be obtained from increased investment. Theoretically, however, they are opn to the criticism of neglecting the fact that there are two ways to expand output. Even if we were to decide that it would be better to increase capital more slowly and to concentrate effort on increasing consumption, we must decide this with open eyes after well considering the alternative. I am myself impressed by the gert social advantages of increasing the stock of capital until it ceases to be scarce. But this is a practical judgement, not a theoretical imperative."
Consumption isn't anti-thetical to the Keynesian system, but there's a strong presumption towards investment... I thought I had read another passage at some point that made the point even more strongly than here. If I find that again I'll post it.
The Economics of Regional Self-Esteem
1 hour ago