Addressing Myth of 'Crowding Out' Myth
Standard economic theory maintains that, in the absence of externalities, private investment works pretty well. Entrepreneurs tend to acquire the capital necessary to take on valuable projects because they stand to gain when those projects succeed and lose when those projects fail. Public investment, in contrast, is not subject to the same profit-and-loss mechanism. The relevant public sector decision makers have a hard time knowing whether a project is worth pursuing and have little incentive to act in accordance with that information when it is available.
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