ABSTRACT
§ 1. The distinction between grants and purchase prices is less prominent in this chapter, which is concerned with the effects of public expenditure on production, than in the discussion, which occupies the next chapter, of the corresponding effects on distribution. In this chapter the essential fact is that public expenditure, combined with taxation and other methods of raising public income, causes large diversions of economic resources from the channels, into which they would otherwise have flowed, into channels determined by public policy, and may consequently cause large changes both in the character and in the total volume of production.
