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What matters is return. I don’t have to specify “risk-adjusted” return so long as | describe the collective scale alone. Collective return is implicitly average-risk return. I prioritize it on the reasoning that optimizing employment of people and plant is implicit, and that optimizing means putting them to work most productively rather than over the most hours. If policy maximizes rate of return, at the collective scale, it will maximize true output perforce. Return is output divided by total capital producing it. More return is more output per unit capital. Putting idle plant and people to work, in a slump, is a step in the right direction. But it doesn’t get the job done unless they work productively. Even putting money under the mattress is better than investing at a loss. Zero return is better than negative return. | accept Keynes’ distinction between new investment and transfer payments. But | see the latter as part of the mechanics that ends up in the former. Maximize return, and full employment will happen. Keynes’ opposition is now mostly the Chicago school and other “freshwater” schools bordering the Great Lakes and along inland rivers. Somehow the taste for Keynesian intervention resonated best in “saltwater” seaboard school such as Harvard, MIT, Stanford, and University of California. It is probably no coincidence that the saltwater states are the “blue” ones tending to vote Democrat, while the freshwater ones are the “red” ones favoring Republicans. (I call myself a free market Democrat, whether or not that’s a contradiction in terms.) Freshwater views tend to oppose intervention, but accept Keynesian basic definitions and equations such as the Y =] +C doctrine and the distinction between “attempted saving” and investment. It is these I question. I don’t think much of his view that intended saving (consumption foregone) becomes actual saving only if invested, and becomes an equal amount of physical capital growth if itis. Then (actual) net saving, net investment and physical capital growth would become synonymous. | said why I prefer a language where saving and investment are synonymous in the first place. What matters is rate of return. Chapter 8 Banks, Money and Macroeconomics 2/8/16 15 HOUSE_OVERSIGHT_011104