Chapter 3: A critique of two key concepts in Keynesian textbooks
The purpose of this chapteris to discredit Keynesian income–expenditure analysis and the concept of the multiplier embedded within it. These two key concepts of the Keynesian textbook mainstream omit variables critical to the determination of macroeconomic outcomes. The omissions are so serious that the income–expenditure circular flow is incomplete and misleading if it pretends to constitute a policy-making framework. Critically, when organized in its familiar textbook form, income–expenditure analysis has no room for either the banking system or the quantity of money. But changes in the quantity of money have major impacts on asset portfolios and expenditure decisions. These changes must be integrated in all discussions of the macroeconomic conjuncture if such discussions are to make any claim to real-world plausibility.
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