tag:blogger.com,1999:blog-2277215496195926573.post8962333701841794891..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Message to the Fed: this is the modern monetary theory (MMT) transmission mechanism.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2277215496195926573.post-45200761599693826372010-09-30T02:21:02.662-07:002010-09-30T02:21:02.662-07:00Anon: strikes me the MMT transmission mechanism wo...Anon: strikes me the MMT transmission mechanism works even if the multiplier WAS zero. By “multiplier”, I mean the fact that those who get jobs increase their weekly spending, which in turn employs yet more people. As I pointed out above, the transmission works via several channels. I.e. even if the multiplier is zero, you’ve still got channels 1 and 3 plus “4 less the multiplier element in 4”.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-6598385020454272312010-09-29T13:49:35.077-07:002010-09-29T13:49:35.077-07:00As Mosler says, it doesn't matter if the fisca...As Mosler says, it doesn't matter if the fiscal multiplier is smaller. That just means you can cut taxes more. but many have found evidence of the fiscal multiplier, even of late. See the paper by Zandi in 2008, for instance, or even CBO. Basically, as long as the multiplier is greater than 0, MMT's transmission mechanism works.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-50987753281026574732010-09-29T06:11:05.533-07:002010-09-29T06:11:05.533-07:00Neil: the explanation for the difference of opinio...Neil: the explanation for the difference of opinion on the multiplier could be thus. My points above were based on the assumption that government “net spends” to use my actual phrase. This was supposed to imply what you might call an Abba Lerner scenario where government just prints money and spends it (as opposed to what you might call a Keynes scenario, where government borrows money and spends it).<br /><br />Assuming a Lerner scenario, I don’t see how the multiplier can be denied. That is, extra people employed are bound to spend a portion of their extra income, which in turn employs more people.<br /><br />In contrast, in a Keynes scenario, it is possible there is no multiplier because the borrowing cancels out not just the multiplier, but all the stimulatory effects of “borrow and spend”. <br /><br />On this subject I’ve just sent an article off to Munich RepEc attacking Keynes for the above sort of reasons. The article is called “The Flaws in Keynesian Borrow and Spend” and should appear there in the next week or so. And the above anti-stimulatory effects of government borrowing is one of the potential weaknesses in “borrow and spend” which I point out.<br /><br />Munich: http://mpra.ub.uni-muenchen.de/Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-89337468091676512082010-09-29T03:34:54.617-07:002010-09-29T03:34:54.617-07:00Where's the evidence for the fiscal multiplier...Where's the evidence for the fiscal multiplier effect?<br /><br />John Maudlin states “I can’t think of a more tired old theory than the Keynesian notion that $1 of additional government spending will generate $1.5 of real GDP. This ‘multiplier effect’ is taught in every introductory macroeconomic textbook. Yet, it is both theoretically and empirically questionable.” <br /><br />http://pragcap.com/why-qe-doesnt-work<br /><br />He then states "the supporting evidence for my view [is] in an OECD working paper by Roberto Perotti titled “Estimating the Effects of Fiscal Policy in OECD Countries,” <br /><br />Is there opposing evidence?Neil Wilsonhttps://www.blogger.com/profile/18178155357632397049noreply@blogger.com