Yes, a nice point to make. IMO, that makes it rather obvious that the multiplier effect is a rather bogus theory. Did you ever wonder why it is Government dollars that get multiplied, and not anything else?
Lets see, the government takes a $ in tax, and returns $0.85 (due to inefficiency, BTW I just made up the 15% decrease) which then gets multiplied by the multiplier to make the economy grow.
Oops, what is wrong with this particular incarnation of the Perpetual Motion Machine? Oh, that $ that was yanked out in tax needed the same multiplier factored in.
Sorry, economic systems are not magical either. Now, if you borrow from somebody outside the system, yes, I could see a multiplier in that case. But within a close system, it is nonsense. |
