Joseph Stiglitz, Photo: EconomyWatch

In an NPR interview, Nobel Prize-winning economist Joseph Stiglitz explains why public investments in infrastructure, technology and education aren’t only good for job creation – they guarantee the “future potential output” of the economy.

These types of investments pay huge dividends and have a high rate of return. By spending more on schools, roads and science and technology, the U.S. will be in a stronger position to create and attract jobs with a highly skilled workforce. In turn, these jobs and companies will drive economic expansion, and the resulting tax revenues can be used to pay down the deficit.

Stiglitz argues for these investments, and against “mindless austerity”, asserting extreme cuts to domestic spending won’t lower the deficit – and will instead have the opposite affect:

The economy is going to get weaker, tax revenues will go down, more people will be unemployed, expenditure for unemployment insurance will go up, expenditure for welfare payments will go up, and the savings and the deficit will be much smaller than they anticipated.

We’re already seeing, you know, you might say examples, case studies, of this. The U.K. began its austerity package and the economy has gone into a double dip.”

Listen to the full interview with Joseph Stiglitz here.