Rothbard's reductio of the multiplier

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    Professor Manish,

    Gene Callahan *insert cartoon bears’ raspberry here* offers a response to Rothbard’s reductio ad absurdam of the multiplier here:

    Of course, his attempt to attribute this to dishonesty on Rothbard’s part is (typically) ridiculous. But it sure seems to me that his basic criticism is valid, and that Rothbard, unfortunately, just made a mistake in this case. Have I missed anything?



    I believe Callahan is broadly correct. The key point he is making in his criticism is that Rothbard ignores the inter-relationship between R and V (in his example), which would be akin to ignoring the interaction between C and I in the Keynesian multiplier story. That interaction between C and I, whereby an initial increase in I translates into an increase in Y which in turn leads to an increase in C in accordance with the consumption function is indeed vital to the multiplier story.
    I also agree with you that we can ignore the malice in Callahan’s argument regarding Rothbard’s motivations!

    GP Manish

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