Keynes, Bastiat and the Multiplier

Abstract

Keynes is back. President Obama’s economic stimulus package is based on the premise that we can spend our way out of recession. It is an application of the Keynesian multiplier theory, which was expounded in Keynes’ 1936 economic treatise, The General Theory of Employment, Interest and Money. Post-1936 economic history has given the multiplier theory mixed reviews, mostly because it has done a less than perfect job of explaining economic reality.Frederic Bastiat (1801-1850) was a French economist and journalist. He discussed the multiplier theory in the 1840s, more than a generation before John Maynard Keynes (1883-1946) was born. This paper explores the similarities and differences of their two multiplier theories. A bibliography with links to other Bastiat studies is also included.