The Multiplier Effect

[John_James]

@EmbraceLiberty

I’m sorry. In my macroeconomics class we were told that Keynes came up with the money multiplier and the marginal propensity to consume equation.

Either your economics class is more full of shit that usual and didn’t even get it’s own Keynesian nonsense right, or you misunderstood. Again, read the definition of “money multiplier” (which was already provided to you twice before.)

I read the excerpts from Money, Bank Credit, and Economic Cycles and it only talked about the investment multiplier not the “fiscal multiplier” that I was referring to.

Did I not just tell you (twice) that the “investment multiplier” is what Keynes talked about? It’s literally on the first page of “The Multiplier” chapter of the first resource recommended to you in the last thread.

What I learned is that the investment multiplier is false;

Good. That’s the point. That’s the answer to your question.

I was asking about the idea that money goes from one person to the next.

I’ve never heard of anyone who denies this. I don’t know where anyone would get the idea that anyone believed that money doesn’t get exchanged. That has to be the most asinine thing I’ve ever heard. If you have an example of anyone suggesting such a thing, please point me in their direction.

I did watch the Friedman video and already understand that concept, but what I have trouble understanding, that Rorschach clarified, was if Austrians believe that money goes from one person to the next.

See above. What the heck did you think Austrians (or anyone else) would believe? I can’t even fathom what else is essentially possible, let alone plausible. Honestly, what did you have in mind?

Now, if I may ask, from reading some comments on this forum what are the flaws of the marginal propensity to consume?

Serously? One more time. Have you looked at all into the resources that were suggested to you in the first thread? In particular, the first one in the first response of that thread? The first three recommended pages? Or that whole chapter, really. (Not to mention the entire two chapters prior to it, titled “the propensity to consume”.)

If you understand what’s wrong with the multiplier, I don’t quite see how you cannot understand what’s wrong with the “marginal propensity to consume”.

There is never any fixed, predictable “multiplier”; there is never any precise, predeterminable, or mechanical relationship between social income, consumption, investment, and extent of employment.

Please look into the resources that have been suggested to you.

[EmbraceLiberty]

Either your economics class is more full of shit that usual and didn’t even get it’s own Keynesian nonsense right, or you misunderstood. Again, read the definition of “money multiplier” (which was already provided to you twice before.)

I understand the money multiplier now. I was merely stating what I was taught not what I now know. Thank you.

Did I not just tell you (twice) that the “investment multiplier” is what Keynes talked about? It’s literally on the first page of “The Multiplier” chapter of the first resource recommended to you in the last thread.

Yes, I understand and understood it when I wrote my previous post . I was simply restating that I had thought earlier that the money multiplier was the fiscal multiplier. Thank you.

I’ve never heard of anyone who denies this. I don’t know where anyone would get the idea that anyone believed that moneydoesn’t get exchanged. That has to be the most asinine thing I’ve ever heard. If you have an example of anyone suggesting such a thing, please point me in their direction.

I misunderstood what someone said. Again, I thought (at the time of starting this thread) that the money multiplier was the exchange of currency (which I must repeat is something I know longer believe) and when an Austrian rejected it I thought they were rejecting the exchange of currency.

See above. What the heck did you think Austrians (or anyone else) would believe? I can’t even fathom what else is essentially possible, let alone plausible. Honestly, what did you have in mind?

I had nothing in mind that is why I asked the question.

I read the pages of the book The Failure of the New Economics. I’m going to type a response later.