“The need to reflate the UK economy has not gone away...”
- Direct government investment in infrastructure
- A National Investment Bank
- Local authority bonds for the “green economy”
The multiplier is a central concept in economics and especially regional studies where it is widely used to assess the long term impact on employment and output from different forms of investment. As such it represents a significant part of the Keynesian aggregate demand model of the economy and can be described as the impact of the marginal propensity to consume (mpc) on a given investment or expenditure where the higher the level of mpc the bigger the multiplier (Heertje & Robinson, 1979).
- It is misleading to take the view that public spending decisions are optimal – we cannot assume that our spending isn’t at the expense of private investment simply because it has multiplier effects
- Taxation – the thing at the heart of Murphy & Hines’ proposals – has an opportunity cost. If you take something in tax, even deferred taxation in the form of public borrowing, that comes at the expense of private activity and private spending