tag:blogger.com,1999:blog-1141932539860553199.post5316827834126906494..comments2024-03-05T10:52:24.691+00:00Comments on Mark Wadsworth: Economic Myths: The Fiscal MultiplierMark Wadsworthhttp://www.blogger.com/profile/07733511175178098449noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-1141932539860553199.post-15465156778201477282014-06-19T21:45:58.626+01:002014-06-19T21:45:58.626+01:00In the multiplier chapter of "The General The...In the multiplier chapter of "The General Theory of Employment, Interest, and Money" (1936), Keynes gives credit to Kahn, whose "multiplier" he said was "a little different". <br /><br />But it was Keynes:<br /><br />1)Who claimed to have established the "multiplier" law in economics.<br /><br />2)Who devised the roundabout way to put addition first in the math order of operations, without appearing to have done so.<br /><br />So unless Keynes was not responsible for his own actions, then Keynes gets the credit for them. <br />Tugwithttps://www.blogger.com/profile/09839475973811243526noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-78291928315726988552014-06-19T20:45:56.329+01:002014-06-19T20:45:56.329+01:00TW, the Wiki entry says:
"The existence of a...TW, <a href="http://en.wikipedia.org/wiki/Fiscal_multiplier" rel="nofollow">the Wiki entry</a> says:<br /><br /><i>"The existence of a multiplier effect was initially proposed by Keynes student Richard Kahn in 1930 and published in 1931"</i><br /><br />So I'm not convinced you can pin this particular bit of nonsense on Keynes himself.<br /><br />Not that it really matters either way.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-59025870968772349442014-06-19T20:25:32.030+01:002014-06-19T20:25:32.030+01:00What Keynes actually said, was that he had discove...What Keynes actually said, was that he had discovered a new "economic law": the fiscal "multiplier". <br /><br />It can be used against us by any government morons, regardless of ideology. <br /><br />But it's based on illegal, fallacious, asinine, and fraudulent math. And because it's math, you can prove that.<br /><br />So when word gets out, Keynesian economists will have to admit to being one of the following:<br />1) Frauds.<br />2) Morons.<br />3) Lunatics.<br /><br />There are no other choices. <br /><br />And I'm going to be LMFAO :D<br /><br />Tugwithttps://www.blogger.com/profile/09839475973811243526noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-33415324140151287972014-06-19T19:08:34.144+01:002014-06-19T19:08:34.144+01:00TW, agreed.
Problem is, the supposed right winge...TW, agreed. <br /><br />Problem is, the supposed right wingers have hijacked even something as flawed as the leftie Keynesian doctrine (which in turn is a crass misrepresentation of what he actually said).<br /><br />So they think it's justifiable for the government to subsidise banks and land owners and other monopolists. Which is even worse than paying people to dig holes and then fill them in again.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-12909209627160256732014-06-19T18:20:23.902+01:002014-06-19T18:20:23.902+01:00I do get your point.
But there's no reason f...I do get your point. <br /><br />But there's no reason for the government morons to use common sense and eliminate wasteful spending, when they've got Keynesian economists (using illegal and fraudulent math) to tell them:<br />1) Government can't overspend.<br />2) Government spending is better than private sector spending, better than tax cuts.<br />3) $1 of tax, and $1 of government spending, will get you a free $1 increase in national income.<br />4) Waste doesn't matter.<br /><br />In fact, Keynesians say that wasteful spending is the best spending. They give the highest "multiplier" values (1.64 to 1.73), for paying people to do nothing. <br /><br />And the government morons always tell us about the great things they will do with our $1 (then they do something else with it) and ignore what we would have done with it. <br /><br />Keynesians have used illegal and fraudulent math to get around Bastiat's "broken window".<br /><br />There's no "stimulus" from waste and Three Stooges Math.<br />Tugwithttps://www.blogger.com/profile/09839475973811243526noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-73914037359226939662014-06-18T21:16:17.785+01:002014-06-18T21:16:17.785+01:00T, ah, that was you, well done.
But you are also...T, ah, that was you, well done. <br /><br />But you are also missing the point, government spending can be good, neutral or bad. Taxes can be good, neutral or bad.<br /><br />So common sense says, raise the good taxes first and spend it on good stuff, and keep going until you are raising neutral taxes and spending it on neutral stuff. Then you stop, that is the upper limit of tax and spend.<br /><br />Raising bad taxes and spending on bad stuff are both equally bad. Which is what most Western governments do, on both sides.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-14647270620801436892014-06-18T19:22:10.467+01:002014-06-18T19:22:10.467+01:00I made that Downfall video to go with my Fiscal Mu...I made that Downfall video to go with my Fiscal Multiplier Debunked cartoon bear videos. But now YouTube threatens me if I make Downfall videos, so I made my own cartoon Hitler. Here's one if you're interested:<br /><br />Hitler Debunks Fiscal, Tax Cut, and Balanced Budget Multipliers<br /><br />http://youtu.be/DqwedjQyYuQ <br /><br />So when talking about the supposed benefits of tax, you have to consider:<br />1) There are no multipliers.<br />2) Keynesians have used even more fraudulent math: disguising the "saved" fraction of disposable income: (1-b)Yd, as (a+I+NX+G), to falsely promote tax and government spending.<br /><br />With taxes, you're dealing with:<br />-1 +1 = 0 <br />The fraudulent Keynesian math makes it turn out: <br />-1 +1 = 1 <br /><br />The fiscal "multiplier" uses a series of math frauds, and plausible-sounding bogus cover stories.<br /><br />What's really interesting, is that Keynesians would rather let economies crash from government waste, debt, and money-printing to pretend to pay the debt, than admit that they've been running a scam. <br /><br />But word will get around, and there'll eventually be serious ass-kicking.<br />Tugwithttps://www.blogger.com/profile/09839475973811243526noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-16360154464386168292014-06-18T07:17:25.283+01:002014-06-18T07:17:25.283+01:00T, thanks. And here's the corresponding Downfa...T, thanks. And here's <a href="https://www.youtube.com/watch?v=-_ZwvKoDTzo" rel="nofollow">the corresponding Downfall spoof</a>.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-36154990486818677972014-06-17T20:46:23.326+01:002014-06-17T20:46:23.326+01:00It's easy to prove that the fiscal "multi...It's easy to prove that the fiscal "multiplier" is mathematical nonsense.<br /><br />Keynes' original equation:<br /><br />ΔY = ΔC + ΔI<br />ΔY = bΔY + (1-b)ΔY<br /><br />Keynes called his investment "multiplier" k, and said:<br />k = ΔY/ΔI = ΔY/(1-b)ΔY = 1/(1-b)<br /><br />b = marginal propensity to consume<br /><br />Here's baseline income with some numbers:<br /><br />Y = C + I <br />100 = 90 + 10<br /><br />Add $1 of investment. <br />Both sides must give the same result:<br /><br />Y +1 = C + I +1<br />100 +1 = 90 + 10 +1<br />101 = 101<br /><br />So:<br />ΔY = ΔI = 1<br />k = ΔY/ΔI = ΔY/(1-b)ΔY = 1/(1-b) = 1/1 = 1 <br />The "multiplier" is 1 <br />and b MUST = 0 <br />Investment has zero propensity to consume.<br /><br />Actually b has simultaneously 3 different values.<br /><br />Keynes' mistake was to use math.<br />You can prove stuff with math.<br />You can prove that the fiscal "multiplier" is nonsense.<br /><br />I've debunked the whole scam at <br />Tugwit.blogspot.com<br /><br />TugwitTugwithttps://www.blogger.com/profile/09839475973811243526noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-44166036808538919642014-06-17T08:46:28.849+01:002014-06-17T08:46:28.849+01:00Too much double-entry book keeping in all this.
Th...Too much double-entry book keeping in all this.<br />The Government's task is to make sure there is enough money in the hands of the punters to buy all the goods and services. So demand=supply<br />The problem comes when money ends up in the hands of people who don't work very much and are deemed undeserving. This becomes acute with something-for-nothing schemes like Douglas's Social Credit ( work out/guess how much spare capacity there is and dish out enough spending power to match increased supply) and Citizen's Income schemes.<br />Strangely enough Homeownerists love something-for-nothing schemes when they consist of handing out huge capital gains to homeowners which they can use as income. Hoemownerism is basically Douglas Social Credit but for old homeowners.Ridiculous. DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-80147842251922357362014-06-16T20:09:14.395+01:002014-06-16T20:09:14.395+01:00DBC, broadly agreed. But in a simplistic way, the ...DBC, broadly agreed. But in a simplistic way, the point of collecting taxes is to prevent inflation and cancel out money printing. And the other justification is to redistribute income. But we know taxing economic activity is bad.<br /><br />Therefore whichever the best thing to tax is something which is not 'economic activity' i.e. land ownership. Sorted.<br /><br />NC, I did specifically mention roads (and railways) as something which usually pay for themselves.<br /><br />But once you've built 'enough' roads, then you stop building them as the return is negative (famously, the Humber Bridge).Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-42479417547566500072014-06-16T17:39:07.221+01:002014-06-16T17:39:07.221+01:00I think it probable that some industries have a mu...I think it probable that some industries have a multiplier because they increase the efficiency of other industries (road building would be an example, X-Prizes another) while some have no effect (Bingo Halls) and some even a negative effect (importers).<br /><br />So if government taxes importers and bingo and puts the money into roadbuilding and X-prizes it should & I think would have a net beneficial effect.<br /><br />Assuming we don't count governments admin costs and assuming they build roads at competitive rates (they don't they average 8 times more than the rest of the world) and assuming the X-prizes are set sensibly (they aren't - government puts it all in to grants instead which are provably 33-100 less effective).neil craighttps://www.blogger.com/profile/09157898238945726349noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-86042928860656238972014-06-16T09:37:26.003+01:002014-06-16T09:37:26.003+01:00NB Should be "banks do not have loads of mone...NB Should be "banks do not have loads of money"above.My apologiesDBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-48592222189931533132014-06-16T09:35:22.650+01:002014-06-16T09:35:22.650+01:00You can only inject newly created money into the e...You can only inject newly created money into the economy up to the point where you utilise all the spare capacity.Which Hitler thought meant getting the unemployment figures right down.When all the capital equipment is running flat out churning out goods and distributing wages ( some kind of unearned income for all might be needed to equalise demand with supply totally)then you reach a point where inflation might set in.<br />All this talk of deficits is the big bogeyman of Political Economy.<br />The financial system and the banks do have loads of money they lend to cash strapped governments: they make it up which governments could do for themselves .Professor Victoria Chick "Banks do not lend money.They do not have pots of money which they are passing on."DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-44665835124635333362014-06-16T07:33:30.671+01:002014-06-16T07:33:30.671+01:00RM, so you've no truck with old fashioned conc...RM, so you've no truck with old fashioned concepts like "value for money"?<br /><br />(And no, subsidies for landowners do not boost GDP, they reduce it. If you pay people to do nothing, they will do nothing instead of doing something).<br /><br />So if you were in charge, how would you set the upper limit for government spending, and how high would the deficit be after five years of Ralphonomics?Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-34529239042500018332014-06-15T17:57:19.105+01:002014-06-15T17:57:19.105+01:00Mark, EU contributions come back to the UK in the ...Mark, EU contributions come back to the UK in the form of grants for rich farmers and other “worthy” causes which we could perfectly well have supported ourselves without bothering with EU bureaucrats. Likewise, aid payments have lots of strings attached: specifically that the money is spent on stuff made in the UK.<br /><br />So the above two items DO BOOST British GDP. As to how much they boost GDP by, I was just taking the worst possible scenario from the “multiplier” point of view, namely that the multiplier is zero, and showing that that zero multiplier really doesn’t matter. I.e. if the multiplier is precisely and exactly zero, then printing and spending £30bn raises GDP by £30bn. Indeed if printing and spending £30bn raised GDP by only £15bn, there still isn't a problem. Printing money costs nothing in real terms.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-21287951743949633862014-06-15T15:52:39.811+01:002014-06-15T15:52:39.811+01:00RM, who says?
If the government "prints"...RM, who says?<br /><br />If the government "prints" £30 billion and "spends" it on aid payments and EU contributions, by how much does GDP rise?Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-78705861369727039202014-06-15T14:39:14.862+01:002014-06-15T14:39:14.862+01:00If there is no multiplier at all, it matters not o...If there is no multiplier at all, it matters not one iota. E.g. if in printing and spending £X, GDP rises by £X, what’s the problem? Assuming the economy has spare capacity, that money printing will not be inflationary.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-21278943115411066842014-06-15T13:10:40.669+01:002014-06-15T13:10:40.669+01:00DBC, "Since government spending is an aggrega...DBC, <i>"Since government spending is an aggregate, I cannot see the point of disaggregating it."</i><br /><br />Ok, forget clever economics, what is wrong with the good old fashioned notion of "value for money"?<br /><br />Police and roads pay for themselves many times over. <br /><br />Straight cash redistribution via welfare is a positive up to a certain level and negative above that; <br /><br />Some things are just negative (long list includes PFI, war in Iraq, political correctness, quangos, overseas aid etc).Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-14646591516650361862014-06-15T13:06:42.542+01:002014-06-15T13:06:42.542+01:00Most definitions talk about the fiscal multiplier ...Most definitions talk about the fiscal multiplier in the singular e.g. "The ratio in which the change in a nation's income level is affected by government spending ".Since government spending is an aggregate, I cannot see the point of disaggregating it.<br />Agreed LVT helps cure most known ills but it is a specific<br />for problems with Keynesian stimulus so if you want such stimuli to work you have to have LVT back-up.Of course if you are a pre Joe Chamberlain-ite laissez faire revivalist you may feel the economy is a self-righting mechanism (provided the government arranges for huge sums of newly created money to be poured in the top) but then you would be entirely wrong .DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-36093956500699967202014-06-15T07:22:30.733+01:002014-06-15T07:22:30.733+01:00There is no 'recovery'. It's just GDP...There is no 'recovery'. It's just GDP bullshit. GDP being capable of being manipulated.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-66131880469693404142014-06-14T20:44:35.847+01:002014-06-14T20:44:35.847+01:00DBC, firstly there is no single, identifiable &quo...DBC, firstly there is no single, identifiable "fiscal multiplier", that's the whole point, and secondly, everything works better with LVT. <br /><br />B, at least under New Labour you had a vague idea of what they were spending/wasting it on, under the Lib-Cons it is a mystery.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-55092745855641984992014-06-13T18:33:09.038+01:002014-06-13T18:33:09.038+01:00"what they are spending it on is an absolute ..."what they are spending it on is an absolute mystery to me"<br /><br />Well, practically every time I listen to Radio 4, there is someone whining either for compensation or a place at the public udder, and many a mickle makes a muckle.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-28083435058608030922014-06-13T16:01:30.381+01:002014-06-13T16:01:30.381+01:00The fiscal multiplier will only work surely with L...The fiscal multiplier will only work surely with LVT back-up.Otherwise all the stimulus money will put up land prices ,increase rents ,decrease demand among the punters and, under the usual bozo regime, actually contract the economy.<br />Much as I admire Keynes,he had no idea about Land Values, although his idol Silvio Gesell was a land nationaliser.DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-7946156703313734642014-06-13T14:25:55.451+01:002014-06-13T14:25:55.451+01:00Yet, "Macroeconomics" are taught With th...Yet, "Macroeconomics" are taught With the fiscal multiplier as a given, With the only country-specific variable AFAIR being the savings rate, even if country A can raise 10% of GDP from VAT, zero from land, and vice versa in country B. It's dismal indeed...Kjhttps://www.blogger.com/profile/13530243002915410700noreply@blogger.com