A nutty model for teaching macroeconomic models

Abstract

This pedagogical paper draws attention to Basil Moore's peanut multiplier theory of income determination and argues that it is a useful tool for teaching macroeconomic models and for critical understanding them. The peanut multiplier theory can be used to teach the essential elements of any macro model, the manner in which the internal logic of a model can be explored, and the manner in which external critiques of a model can be formulated, all within an ideologically neutral yet still memorable context. A critical understanding of the peanut multiplier theory also lays the foundation for a critical understanding of standard macro models like the simple Keynesian theory of income determination, quantity theory of money, and money multiplier theory. Student feedback provides evidence of the effectiveness of using the peanut multiplier theory to teach macro models.