Rothbard's Critique of the Multiplier
Murray Rothbard never cared if an argument he offered was sound, but only about whether it seemed to make his opponent look stupid. Consider, for instance, his "reductio" of the Keynesian multiplier: Social Income = Income of (insert name of any person, say the reader) + Income of everyone else. Let us use symbols: Social income = Y Income of the Reader = R Income of everyone else = V We find that V is a completely stable function of Y. Plot the two on coordinates, and we find historical one-to-one correspondence between them. It is a tremendously stable function, far more stable than the “consumption function.” On the other hand, plot R against Y. Here we find, instead of perfect correlation, only the remotest of connections between the fluctuating income of the reader of these lines and the social income. Therefore, this reader’s income is the active, volatile, uncertain element in the social income, while everyone else’s income is passive, stable, determined by ...