Talk:Spending multiplier

From Wikipedia, the free encyclopedia

	This article is within the scope of the Economics WikiProject, an effort to create, expand, organize, and improve economics-related articles..
Start	rated as start-Class on the assessment scale
Low	rated as low-importance on the importance scale

If MPC rises , will the multipler get larger?

yes

[edit] Harry Potter and the Magic Multiplier

the multiplier is a big myth, it is built on entirely unfounded premises, ignores opportunity cost and by the estimates of keynesian economists themselves (see Bryant, Holtham and Hooper)using their own models drops to <1 after 2 years. Not to mention that nobody has actually measured it in real life. Even if we believed (yes faith is required in the absence of empirical evidence) that the logic behind the multiplier works, the effect of the negative multiplier when S is reduced makes it meaningless as far as policy implications go. The other irony is that the multiplier is often used to justify govt. intervention, and yet the keynesians own studies strongly suggest that there is a larger multiplier for private investment than for government spenditure. Funny ain't it?

-Also, don't forget that if consumers spend all of their income, then the multiplier will be infinite. As Murray Rothbard said, "Sure beats working!"

[edit] Criticism of the Multiplier effect

I think that the criticisms of this theory should be included in this article too. What do you think?

of course, like any hypothesis or theory, it cannot be presented as fact. Including some reference to contradictory theories and criticism is necessary. --Flix2000 19:47, 13 October 2006 (UTC)

The article states that "certain schools of laissez-faire which embrace Say's Law and deny the possibility of... under-employment of resources..." This is not strictly correct, but I'm having trouble re-wording it. These schools of laissez-faire do NOT deny the possibility of under-employment of resources, but I'm not really happy with just changing it to "under-employment of resources in equilibrium" or "persistent under-employment". Any suggestions? Even if consumers spend all their income the multiplier would never be infinite. At every economic transaction taxes are levied and represent a sink that in the end totals the original investment on one side, and on the other side prevent the multiplier (more correctly the original investment) from becoming infinite. That is why any investment by the government will sooner or later recovered in form of taxes. Solipso52 —Preceding unsigned comment added by 71.222.96.62 (talk) 02:43, 13 January 2008 (UTC)

[edit] :-P

good job.. someone spelled arugment wrong