A KEYNESIAN ANALYSIS OF DEFICITS.

A KEYNESIAN ANALYSIS OF DEFICITS. I think that in analyzing a policy to deal with a recession, Keynes would include an analysis of the policy’s effect on aggregate investment. A letter in the Financial Times (July 22, 2010) by Sheila Dow, Professor Emeritus of Economics, University of Stirling, Scotland, analyzes the current debate about deficits in terms of the effect of deficits on investment. She points out that Keynes “argued that policymakers must seek to boost business confidence, to change conventional judgments and to stir up their animal spirits (the urge to action in spite of uncertainty).” She then restates the deficit debate in Keynesian terms: “The debate now is about whether fiscal stimulus or austerity would in fact encourage reasonable producers to invest.”