New Books in Economics (Jan. 2017)

Among the books in economics published very recently one deserves further attention.This is Prof. John Heim’s Crowding Out Fiscal Stimulus (Springer).

Crowding out refers to the circumstance when demand-enhancing efforts of expansionary budgetary policy crowd out private investments by increasing the rates of interest. With a given cost structure and a level of expected sales revenues, an increase in the rates of interest on credits naturally makes some investment programs unprofitable. This is the brief summary of a well-known macro-economic phenomenon.

In this book Heim using modern econometric methods analyses if US government stimuli over the last fifty years worked at all. His answer is negative. The key could be found in the well-known Crowding Out Effects. No matter how hard a government tries to start the engine of his economy through tax cuts and spending booms, these actions only tend to crowd out as many private investment activities as the government itself intended to initiate.

Crowding out has always been of central importance in the hand of neaclassicals when arguing against Keynesian macro-policies. This book can shed light on the core of this debate on the basis of numerical results.

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