A central premise of Keynesian economics is that, during a recession, government spending increases total output through a “multiplier” effect. If the multiplier is 1.0, then every dollar spent by the government on its own consumption -- rather than reducing someone else’s consumption or investment by $1 -- adds a dollar to GDP. Money for nothing! Most Keynesians actually claim fiscal multipliers higher than 1.0, meaning that government spending boosts national income by more than the amount of the spending itself.

Volume 18, Number 1 (Spring 2015)

ABSTRACT: This paper examines Roger W. Garrison’s interpretation of John Maynard Keynes. Garrison has given economists a useful way to illustrate Keynes’s theory, but there are two fundamental problems with Garrison’s interpretation. First, the shape of the Hayekian triangle cannot be fixed in Keynes’s theory. Second, Garrison’s interpretation contradicts the IS-LM model. The demand constraint is derived from the IS-LM model and the IS-LM demand constraint is used to illustrate Keynes’s theory.

Japanese Prime Minister Shino Abe has been touring the US this week. Much of the week was spent apologizing for the War in the Pacific, but Abe‘s also on an economic mission. Japan continues to see lackluster growth thanks, no doubt, to its highly regulated and corporatist economy. But Abe has taken things even further with Abenomics, a “stimulus” program devoted to rapidly expanding the money supply and devaluing the yen.  Has it worked?

Kingsman: The Secret Service is a big-budget semi-satirical take on the spy genre, featuring the film clichés audiences now associate with the James Bond and Jason Bourne franchises. These include global intrigue, amazing gadgetry, beautiful women, hand-to-hand combat, and multiple international locales.

The great James Grant appeared on CNBC yesterday to discuss the latest Fed statement that removed any mention of prospective dates for raising interest rates.

In his own inimitable style, Mr. Grant proceeded to eviscerate the fundamental premise of central banks, namely that prosperity can be created via monetary expansion.  

Mises Daily Thursday by Jonathan Newman: 

FedEx and UPS recently announced they will not deliver some goods that can be used to make guns. These companies should be free to do this, just as all owners should be free to decide with whom they will do business.

I visited Baltimore once, about 10 years ago, for an academic conference.  While I remember its colonial-era architecture, the historic cathedral that once housed the great Cardinal Gibbons, and fun, chowder-laden conversations with local and visiting economists in brew pubs—the image that remains in my mind is that of the rats.  These mangy pack animals seemed to populate every garbage dumpster that I passed at night heading to and from my hotel, and it made me think about the many millions of renovation monies that flowed into Baltimore in the post-Great

Police justify killings like that of Freddy Gray’s on the grounds that such aggressive tactics are necessary to protect lives and property. But when widespread destruction of property, and threats to life and limb appear, the police are breathtakingly inefficient.