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Fiscal Multipliers Debunked?

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ITGF posted on Thu, Jul 7 2011 9:31 AM

I recently encountered a series of youtube videos which claimed to find errors in the logic and algebra underpinning Keynesian economics.

Excuse me for being sceptical, but I think its strange that it has taken 75 yrs to find these flaws. Surely if they existed, it would be well known by now? Below is a link to one of these videos. Has the author found a previously unknown flaw? Or is this well-known? Or has the author, in fact, got it completely wrong?

Pt. 2: Fiscal Multiplier Destroyed: Keynes' Deception
http://www.youtube.com/watch?v=encPMexUm8w

If you are interested, here is the full list of videos:

The Maynard Keynes
http://www.youtube.com/watch?v=pA67E8jMq84&NR=1

Pt. 1: Fiscal Multiplier Debunked and Destroyed
http://www.youtube.com/watch?v=4Vnus-Kw5Is&NR=1

Pt. 3: Fiscal Multiplier Destroyed: The Other Multiplier
http://www.youtube.com/watch?v=sZDIZ1U7gEk

Pt. 4: Fiscal Multiplier Destroyed: The Chain Reaction
http://www.youtube.com/watch?v=y1AVThNZuR4

Pt. 5: Consumption Function & Keynesian Cross Destroyed
http://www.youtube.com/watch?v=2bmsYNnS2MA

Pt. 6: Government Spending Multiplier Destroyed
http://www.youtube.com/watch?v=hHa-HE7Olq0

Pt 7: Tax Cut Multiplier Destroyed
http://www.youtube.com/watch?v=1oUMjJKQkkQ

Pt 8: Balanced Budget Multiplier Swindle - Keynesian Asymmetries
http://www.youtube.com/watch?v=VZL_1L9r-T4

Pt 9: Keynesian Logic - Apples, Oranges, Asses
http://www.youtube.com/watch?v=XErrpJHaExA

Pt 10: Keynesian Asymmetry and "Other Multiplier" Revisited
http://www.youtube.com/watch?v=684WIoQP6XQ

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Tugwit replied on Sun, Sep 30 2012 1:15 PM

I said the guy I was talking to left "a" out of his consumption function.

The guy used Y. Without him labeling it, I don't know whether he meant total of disposable, and he would not show the whole equation so I could tell.

And substituting Yt - T for Yis asinine.

1) You are substituting the equation back into itself. The only reason they do that is to get around the problem that they can't factor Yt out of Yt - bYd.

2) You retroactively apply the marginal propensity to consume, b, to Yt and T, and end up with -bT.

Here's an example:

If Fruit F, consists of Apples A, and Oranges O, and we subtract the Oranges, we are left with the Apples:
F - O = A
F = A + O
Let's say the marginal propensity for apples to be red is b = 0.8, so 0.8 of apples are red, and (1-b) are not red:
F = bA + (1-b)A + O
then we make the asinine substitution of (F - O) for A:
F = b(F - O) + (1-b)(F - O) + O
and multiply out:
F = bF - bO + (1-b)F -(1-b) O + O
We have now erroneously, retroactively, applied the marginal propensity for apples to be red to oranges and all fruit, and find that 0.8 of oranges are red, and 0.8 of the fruit is red.

Keynesians go further and disguise the (1-b)Yd so the scam is not evident.

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Tugwit replied on Sun, Sep 30 2012 1:23 PM

Already asked and answered, but here it is again.

Y = kI is not a standalone equation. It is derived from, and must give the same answer as Y = C + I. 

1) Y = C + I

   10 = 9 + 1

2) Y = I

   10 = 10 x 1

3) Y = C + I

           9 + 1 + 1 = 11

4) Y = kI

        10 x 1 + 1 = 11

Keynes said 10 x 1 + 1 = 20 ! Three Stooges math.

Are there any more Keynesian zombies on mises.org?

 

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We have now erroneously, retroactively, applied the marginal propensity for apples to be red to oranges and all fruit, and find that 0.8 of oranges are red, and 0.8 of the fruit is red.

Not at all. Nowhere does it say that 0.7 of oranges are red. They're just numbers for calculation. The equation is correct.

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Tugwit replied on Sun, Sep 30 2012 1:55 PM

F = bF - bO + (1-b)F -(1-b) O + O

bF is the red fraction of Fruit, so 80% of Fruit is red. bO is the red fraction of Oranges, so 80% of Oranges are red.

-bT is minus the spent fraction of Tax. If b = 0.8, then only 80% of Tax is spent?

They aren't just numbers for calculation. Are you telling me that only 80% of Tax is spent?

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I'm not a keynesian.

but it seems to me like if a keynesian would think that

at time t1 ;    Y1=C1+I1 where Y= 10 and C=9 and I=1   (where this is descriptive of a how Y1 is distibuted)

and that this state of affairs had been brought about by an active mechanism  Y1=kI1    (10=10*1)    (This explain how Y1 is as high as it is)

now supposing, that I was 'boosted' to get magic benefits in Y  i.e. 20=10*(1+1)

then this would result in a nice new state of affairs wherein Y2=C2+I2   :     20=18+2

Thats what I imagine keynesians would say about it.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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Tugwit replied on Sun, Sep 30 2012 2:23 PM

I haven't got any idea what you're talking about, because you're talking like a Keynesian. "boosted", "magic benefits", fragments of algebra

It's simple:

 

1) Y = C + I

   10 = 9 + 1

2) Y = I , where k is Keynes' "multiplier"

   10 = 10 x 1

3) Y = C + I

          9 + 1 + 1 = 11

4) Y = kI

        10 x 1 + 1 = 11

Keynes said 10 x 1 + 1 = 20. Three Stooges math.

And I don't find you credible.

And you are a moderator/administrator on mises.org

Why don't you do a survey and find out how many members of mises.org are Keynesians. Maybe you should change the name to keynes.org.

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ok, now you are just trolling. This is just a friendly warning, which I may regret extending, but the important point is, behave and we will hear you out.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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Tugwit replied on Sun, Sep 30 2012 2:36 PM

You said you didn't find me credible. Was that just trolling? 

And I've heard "Are you blind or just stubborn?"

If you want to kick me out, then do so.

 

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Tugwit, the problem here is that you don't want to take into account the objections that have been made and that you didn't bother to respond just because "this sounds keynesian".

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Tugwit replied on Sun, Sep 30 2012 2:53 PM

What objection didn't I respond to?

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NirgrahamUK, Wheylous, and Chris S. If you disagree with them, you have to show "where" exactly they are wrong. Everyone is waiting. (and don't tell me "I have already replied")

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Tugwit replied on Sun, Sep 30 2012 4:03 PM

I have already replied, so I can tell you that.

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Jargon replied on Sun, Sep 30 2012 5:57 PM

Tugwit, can you answer their objections without dismissing them as Keynesian nonsense? I'm not saying that they're right, I'd just like to hear the fullness of your responses, from start to finish.

Land & Liberty

The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger

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Tugwit replied on Sun, Sep 30 2012 6:18 PM

You have apparently not even read any of my responses.

And since you have no specific question, and want a "full" response "from start to finish", then it's all on

 http://tugwit.blogspot.com/

and on YouTube under MrTugwit.

If you don't understand what I said on blogspot, I can't help you.

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Jargon, you've had time now to read Part 1 of Fiscal Multiplier Debunked on my blog.

If you have read it, do you have any specific question?

Only one question at a time.

And I'm not replying to anybody else until this conversation is over.

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