THE CONSEQUENCES OF MR KEYNES.pdf - Institute of Economic ...

spending or tax cuts, therefore, would not be costless, for it
would destroy the benefits that would result from the control of
inflation.
These direct and indirect consequences act quite differently
on the choices of typical citizens. The direct consequences ofthe
surplus take the form of reductions in presently enjoyed consumption.
If taxes are raised, the consumption of private services
is reduced. If government spending is lowered, the consumption
of government services is reduced. In either case, a budget
surplus requires citizens to sacrifice services they are consuming.
The indirect consequences, on the other hand, are of an altogether
different nature. The benefit side of a budget surplus
is not directly experienced, but rather must be imagined. It takes
the form of the hypothetical or imagined gains from avoiding
what would otherwise have been an inflationary experience. 1
A variety of evidence suggests that these two types of choices
are psychologically quite different. Moreover, appreciation of
the benefits from a budget surplus would require a good deal of
information and understanding. The task is not a simple matter
of choosing whether to bear $ i oo more in taxes this year in
exchange for $120 of benefits in two years, and then somehow
comparing the two, historically distinct, situations. The
imagining process requires an additional step. The person must
form some judgement of how he, personally, will be affected by
the surplus; he must reduce his estimate ofthe total ('macroeconomic')
impact of the surplus to a personal ('microeconomic')
level. As such future gains become more remote
and less subject to personal control, however, there is strong
evidence to suggest that such future circumstances tend to be
neglected. 'Out of sight, out of mind' is the commonsense
statement of this effect. 2
1 This point about the categorical difference between present and future has
been a theme of many of the writings of G. L. S. Shackle. A terse statement
appears in his Epistemics and Economics, Cambridge University Press, 1972, p. 245:
'We cannot have experience of actuality at two distinct "moments". The
moment of actuality, the moment in being, "the present", is solitary. Extended
time, beyond "the moment", appears in this light as a figment, a product of
thought' (Shackle's italics).
• And even to the extent that citizens do creatively imagine such alternative,
conjectural futures, democratic budgetary processes may produce a different
form of bias against the surplus. To the extent that budgetary institutions
permit fragmented appropriations, for instance, a 'prisoner's dilemma' (in
which choices made by each person individually will produce undesirable
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