We still need to justify that we are, infact, facing a sustained collapse in effective demand. The good thing about this quote from Keynes is that he makes this argument tranparently.

Indeed – in the quote Keynes blatantly states as much. However, as I say in the post, Keynes is stating that the policy only makes sense when effective demand is deficient – not in the case of the standard business cycle. Furthermore, his quote does not even mention structural shocks – which is another scenario when higher infrastructure spending is not an optimal response to lower output.

Opppps, sorry. What can I say – I’m blind and illiterate 😛

Money should be invested in green industries, technology, etc.
However the government must create infrastructure to prevent the problems identified by keynes.

Keynes was arguing in 1942 for a system of buffer stocks, or “Commodity Control”, in addition to such an approach. The sentences quoted are immediately followed by this:

“Buffer stick controls to deal with the epidemic of intermittent effective demand are therefore the perfect complement of development organisations (or international T.V.A.) to offset a deficiency of effective demand which seems to be endemic.”

Keynes wanted “international T.V.A.” – to do internationally what President Roosevelt had done with the Tennessee Valley Authority. So much for skepticism about public works!

The context of all this may be seen by reading Keynes’s Collected Writings, or the chapter of Markwell’s “Keynes and International Relations” dealing with Keynes’s vision for the post-war world. The latter makes it clear that it was Keynes being persuaded (e.g. by Alvin Hansen and Luther Gulick) that the United States was sufficiently committed to ideas like “international T.V.A.” that led him to think it safe to advocate an open trading order post-war.

No one reading in context what Keynes actually wrote could, with intellectual integriy, imagine that he was a skeptic about the value of public works to alleviate deficient demand.

Professors of economics (and others) who, implicitly or explicitly, quote out of context are liable to bring themselves into disrepute and contempt. The present crisis is too serious for this.