By Claude Gnos, Louis-Philippe Rochon
The multiplier is a principal proposal in Keynesian and post-Keynesian economics. it truly is principally what justifies activist full-employment financial coverage: a rise in economic expenses contributing to a number of rounds of spending, thereby financing itself. but, whereas a copingstone of post-Keynesian thought, it isn't universally permitted through all post-Keynesians, for purposes drastically diversified than the mainstream.
This e-book explores either the professionals and cons of the multiplier from a strictly post-Keynesian – and Kaleckian – approach. Anchored in the culture of endogenous cash, this booklet deals a full of life dialogue from a few famous post-Keynesians from numerous views: historical past of notion, idea and monetary policy. The publication starts off via analysing the historic foundations of the Keynesian Multiplier and it’s remedy in the course of the historical past of monetary idea. relocating via a serious debate concerning the limits of the multiplier, the contributions end via delivering innovative new perspectives in this attention-grabbing concept.
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Extra info for The Keynesian Multiplier (Routledge Frontiers of Political Economy)
It is not possible, though, to give a full account of this principle, which has been interpreted differently by different (post-) Keynesians. I broadly conform to the interpretation of Vickers (1987). 10 It should be noted that Hicks (1982, 1985) and Lindahl (1939) also envisaged the economic process as a succession of production periods. As Fontana (2004, p. 79) points out: ‘Besides, as he [Hicks] explains, when agents make decisions they have in mind a stage-by-stage temporal frame. ’ 11 ‘Daily here stands for the shortest interval after which the firm is free to revise its decision as to how much employment to offer.
One takes the multiplier for a logical relation between investment expenditure and income that ‘holds good continuously, without time-lag, at all moments of time’ (Keynes, 1973a, p. 84). I have argued that both these (traditional) views rest on unrealistic assumptions. To defend the ‘logical view’ it is necessary to introduce an extreme volatility in the marginal propensity to consume. But this contradicts the very concept of the marginal propensity to consume as it is normally presented by Keynes.
Although the marginal propensity to consume need not be constant forever, it is a ‘psychological’ magnitude that varies only gradually with employment or real income. It is not exposed to violent changes (cf. 120). But in the fourth paragraph of chapter 10, Keynes gives a totally different account of the character of the marginal propensity to consume. 28 This interpretation seems quite artificial to me, because, even though it is uncontroversial that the newly employed workers of department I cannot consume if there is (initially) absolutely no additional supply of consumption goods, the marginal propensity to consume of the whole society would not drop to zero.