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Page 84
toward the earlier position. Sad to say, none of these shifts can be said to be based on satisfactory evidence. They have been based rather on intuitive judgments from crude experience.
In co-operation with some of my students, I have done some fairly extensive empirical work, for the U.S. and other countries, to get some more satisfactory evidence.2 The results are striking. They strongly suggest that the actual outcome will be closer to the quantity theory extreme than to the Keynesian. The judgement that seems justified on the basis of this evidence is that the assumed $ 100 increase in government expenditures can on the average be expected to add just about $ 100 to income, sometimes less, sometimes more. This means that a rise in government expenditures relative to income is not expansionary in any relevant sense. It may add to money income but all of this addition is absorbed by government expenditures. Private expenditures are unchanged. Since prices are likely to rise in the process, or fall less than they otherwise would, the effect is to leave private expenditures smaller in real terms. Converse propositions hold for a decline in government expenditures.
These conclusions cannot of course be regarded as final. They are based on the broadest and most comprehensive body of evidence I know about, but that body of evidence still leaves much to be desired.
One thing is however clear. Whether the views so widely accepted about the effects of fiscal policy be right or wrong, they are contradicted by at least one extensive body of evidence. I know of no other coherent or organized body of evidence justifying them. They are part of economic mythology, not the demonstrated conclusions of economic analysis or quantitative studies. Yet they have wielded immense influence in securing widespread public backing for far-reaching governmental interference in economic life.
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2 Some of the results are contained in Milton Friedman and David Meiselman, The Relative Stability of the Investment Multiplier and Monetary Velocity in the United States, 18961958 (forthcoming publication of Commission on Money and Credit).

 
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