Sir Walter Citrine
[Printed for private circulation only]
THE BUDGET OF NATIONAL RESOURCES
The object of the first section of this memorandum is to explain the paradox that, so far, a large increase in Government expenditure has been accomplished with only a small increase in output and a moderate rise in prices. The object of the second section is to show that a further increase in the rate of Government expenditure is likely to produce consequences of a different order.
The figures suggest that a forthcoming budget of £2,200 to £2,350 million at present prices may not create a serious problem, but that any excess beyond this will require special measures of a new kind.
The method of the following analysis is partly logical, partly statistical. I feel more confidence in the logic than in the statistics, much of which is guess-work. Presumably those in Government Departments will be able to improve on my statistics. (At least I hope they can. They are neglecting their job if they cannot!) But, in doing so, let them remember that this is a Balance Sheet. If one figure is altered, the logic of the analysis requires that other figures must also be altered so as to balance it. This method of analysis has the advantage, as anyone will find who allows his mind to bite on it, that it forces the statistics within a consistent framework.
J. M. KEYNES
31 March 1940
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