Crowding Out: An Empirical Note: Reply

This study examines the existence of crowding-out in the United States by determining to what degree the proportion of GNP devoted to private investment in new capital was affected by the proportion of GNP devoted to aggregate federal government spending. The evidence here strongly supports the crowding-out thesis but indicates that there is only incomplete crowding out. This evidence of incomplete crowding out is at odds with the extreme monetarist position; the existence of a definite but only partial crowding-out effect, however is also at odds with the extreme Keynesian position.