First things first: Military spending does create jobs when the economy is depressed. Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isnâ??t a morality play: spending on things you donâ??t like is still spending, and more spending would create more jobs.
Interesting that Valerie Rameyâ??s work that concentrates on military build-ups (because they are reliably exogenous) often finds a multiplier that is less than one, meaning that government spending crowds out private spending rather than spurring it on. Barro and Redlickâ??s work is similar. Where is the evidence that military spending stimulates the private sector? What does Krugman have in mind?
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