Multiplier Of Criticism Assignment Help | Multiplier Of Criticism Homework Help

Criticism Of Multiplier

Keynes’ concept of multiplier has been severely criticized by many economists.

(1)    According to Meberler, it is a tautology, i.e., something which is necessarily true by definition. Keynes multiplier is defined as below:

K = ΔY / ΔI

It is not surprising that change in the investment (ΔI ) times the multiplier, i.e., ΔY/ΔI should be equal to change in total income ΔY. In other words, it does not make much sense to say that


It is always true and so it does not require any serious attention.

(2)    Professor A.G. Hart considers that it is a “useless fifth wheel” which adds nothing to our knowledge gained by the use of consumption.

(3)    Professor Hazlitt dubs it as a myth and asks “what reason is there to suppose that there is any such thing as the multiplier?” He points out that “there is never any precise, predeterminable or mechanical relationship between social income, consumption, investment and extent of employment. “It is, therefore, just a worthless the type of thing made depressingly familiar by monetary creaks.

(4)    According to Professor Brooman, the concept of multiplier does not provide any insight into the process by which the economy tries to achieve new equilibrium. In his words, “Keynes’ multiplier is a static concept. It gives little insight into the process by which output adjusts itself to new level of demand, is assumed to take place instantaneously or at least so quickly that none of the parameters of the system his time to change-consumers’ preferences remain unchanged, the distribution of income as before, and so on. In real life, it is very unlikely that this would hold good.”

(5)    According to Professor Stigler, “the concept of multiplier seems like nothing but, a cheap way of getting something for nothing and appears to carry with it a spurious numerical accuracy.’

(6)    Ketnes’concept of multiplier concentrates exclusively on consumption. It is just another name for marginal propensity to consume which is based on the assumption of constant. The magnitude of marginal propensity to consume, in fact, does not remain constant. It fluctuates in the different phases of a business cycle. During the boom or the upswing. the value of marginal propensity to consume declines with the growth of  income. Reverse happens during the depression or the downswing. To the extent a community wishes to save a miller or a larger amount out of income, the magnitude of investment multiplier will vary over different periods of time.

(7)    Keynes’ concept of multiplier assumes a linear relation between aggregate income and aggregate spending. Empirical evidence, however, does not support this idea. Empirical studies do show that the relationship between aggregate spending and aggregate income is much more complicated which mat be of a non-linear type.

For more help in Criticism Of Multiplier click the button below to submit your homework assignment