Richard Kerschagl: Review of Wie wirkt die Ausgabe einer zusätzlichen Milliarde Schilling? (1956)

Richard Kerschagl’s short review assesses a study conducted by Josef Steindl and published by the Österreichisches Institut für Wirtschaftsforschung. Its organizing distinction is between the employment effects of additional expenditure and the economic significance of its financing. Kerschagl praises the empirical investigation while insisting that expenditure cannot be evaluated independently of the source of funds.

The review first locates Steindl’s empirical-statistical approach in the traditions of Leontief and, more cautiously, Keynes. It treats the study as a new illustration of the older problem of key industries, which reappears in the Kahn–Keynes multiplier theory. Its model yields noteworthy results, broadly confirming theories previously based on rules of thumb. Kerschagl’s reservation therefore concerns the scope of the inquiry rather than the value of its findings:

Damit diese Arbeit nicht zu Missverständnissen führt – ihr Wert an sich steht ausser jedem Zweifel – wäre allerdings noch auf eines Bedacht zu nehmen: es ist keineswegs gleichgültig, woher die Milliarde stammt!

English translation: So that this study may not give rise to misunderstandings — its value in itself is beyond any doubt — one further point would nevertheless have to be borne in mind: it is by no means a matter of indifference where the billion comes from!

This shift from the uses of money to its origins supplies the review’s central conceptual move. Kerschagl distinguishes fiduciary investment, credit-financed investment, and investment grounded in real capital. For him, these differences determine whether the resulting economic stimulus is inflationary. His reference to contemporary England gives that distinction immediate policy relevance.

The criticism then broadens to Keynesian reasoning that insufficiently differentiates investments by their financing. Kerschagl invokes proposals to develop water power through banknote issuance as a warning, and uses Wagemann’s paired questions about where money goes and where it comes from to insist on a complementary inquiry. His deeper concern is the tendency of Keynesianism and post-Keynesianism to approach John Law’s equation of credit with capital.

The conclusion preserves both the endorsement and its limit:

So verdienstvoll die vorliegende Arbeit ist und so sehr man wünschen möchte, daß ihr ähnliche folgen, so notwendig scheint es, dieses Problem nicht dauernd isoliert von der Frage des Woher zu behandeln.

English translation: However meritorious the present work is, and however much one might wish that similar ones should follow it, it seems just as necessary not to treat this problem permanently in isolation from the question of whence.

Kerschagl ultimately judges the study excellent as a partial investigation. The review’s significance lies in this precise qualification: empirical estimates of employment gains remain valuable, but a fuller economic assessment must connect those gains to the monetary and capital basis of the expenditure that produces them.