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In his article “Depression economics returns” (Business Line, November 15), Paul Krugman has observed that when Depression economics prevails, fiscal discipline becomes a vice.

He has argued that the US government must loosen its purse strings (increasing public expenditure) at this hour of crisis and rising unemployment.

Increased government spending can, no doubt, create employment, but it is the people’s marginal propensity to consume (ratio of increase in consumption to increase in income) that will set the tone for economic recovery.

The higher the people’s marginal propensity to consume, the greater is the possibility of a faster revival.

S. Ramakrishnasayee Ranipet

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