Alexander Field on crowding out and the role of public investment

In this new interview by the Institute for New Economic Thinking (INET), economist Alexander Field explains the role that public investment has in improving the productivity of the private sector during periods of slow economic growth. I thought it would make for a good follow-up to my previous post on the topic of crowding out.

On the issue of whether public expenditures resulted in the crowding out of private spending during the Great Depression, Field argues that:

"There's a clear and compelling argument about crowding out. It's really only relevant either from a theoretical or practical standpoint if the economy is close to potential or natural output. But then, as now, we were not close to full employment so there's no real problem in terms of monetizing government deficits.  It's not going to create an inflationary problem and it's not going to push up real interest rates"

You can find the rest of the interviews in this series on the INET website here.  Also, I previously discussed the productivity-enhancing properties of public investment here and here.