Even Dudley Dillard did not forget that the beneficial effects of public investment financed by loan expenditures may be neutralized by a fall in the marginal efficiency of capital.
1. The neutralizing effect may result from an increase in the cost of producing capital goods as private and public investment are dependent on the same type of factors of production. 2. The possibility of the success of the Keynesian program can damage the expectations of private enterprise, fearful that a newly legitimate government would likely intrude into fields previously restricted to private enterprise. The US government is not facing bankruptcy, and rentier fears of inflation are not making it expensive for the US government to borrow. In this sense, I disagree with Mattick Jr.'s argument that the Keynesian card has been played. The business class is however more likely to rally behind neo-mercantalism and protectionism than it is demand more autonomous government expenditures which are likely to cause a fall in the marginal efficiency of capital, subjectively understood. Keynesians forget that they do not have a mechanical science. What the effect of planned public investment will be on the confidence of businessmen is enigmatic, but it seems clear that they fear the success of an interventionist state, led by a Robin Hood reincarnated as a black reparationist more than they want a few extra bucks in their pockets as a result of autonomous government expenditures. At any rate, given the problem of leakage, autonomous government expenditures do seem expensive given the effects that they do produce.
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