Psychology Dictionary of ArgumentsHome
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| Investment multiplier: The investment multiplier in economics is a factor that indicates the effect of an investment on another variable. See also J.M. Keynes, Consumption function. See also Investments._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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John Maynard Keynes on Investment Multiplier - Dictionary of Arguments
Rothbard III 866 Investment Multiplier/Keynes/Rothbard: The once highly esteemed "multiplier" has now happily faded in popularity, as economists have begun to realize that it is simply the obverse of the stable consumption function. >Consumption function/Keynesianism. However, the complete absurdity of the multiplier has not yet been fully appreciated. The theory of the "investment multiplier" runs somewhat as follows: Social Income = Consumption + Investment Consumption is a stable function of income, as revealed by statistical correlation, etc. Let us say, for the sake of simplicity, that consumption will always be.(1) In that case, Income = .80 (Income) + Investment. .20 (Income) = Investment; or Income = 5 (Investment). Rothbard: The "5" is the "investment multiplier." It is then obvious that all we need to increase social money income by a desired amount is to increase investment by 1/ 5 of that amount; and the multiplier magic will do the rest. The early "pump primers" believed in approaching this goal through stimulating private investment; Problem: later Keynesians realized that if investment is an "active" volatile factor, government spending is no less active and more certain, so that government spending must be relied upon to provide the needed multiplier effect. Creating new money would be most effective, since the government would then be sure not to reduce private funds. Hence the basis for calling all government spending "investment": it is "investment" because it is not tied passively to income. >Accelerator theory/Keynes. 1. Actually, the form of the Keynesian function is generally "linear," e.g., Consumption = .80 (Income) + 20. The form given in the text simplifies the exposition without, however, changing its essence._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconKeyn I John Maynard Keynes The Economic Consequences of the Peace New York 1920 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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