ABSTRACT
In the present difficult times, two diametrically opposite policies are urged upon governments by different schools of economists. One school, basing itself upon what would be prudent conduct for an individual when his income diminishes, says: diminish expenditure in every possible way, dismiss employees wherever possible, cut down the wages of the rest, and so make ends meet. The other school says: the depression is caused by insufficient expenditure, and can only be cured by spending more, but since, at the moment, private capitalists are not finding it profitable to spend in the form of new investments, the spending must be by public authorities. The first of these theories has been adopted by the British government, the second by that of the United States. I believe that America is right in this matter, although, from a common sense point of view, it might seem obvious that the way to get over being hard up is to save. Why is common sense wrong about public expenditure, when it would be right if only an individual were concerned ?
