Economy works differently Episode 1: The indisputable proof that Keynes' Investment Multiplier is a Wrong Theory

Abstract

From its publication in The Times in 1933, John Maynard Keynes’s investment multiplier sparked much debate and controversy. Can an investment generate 3 or 4 times its value in income within one year? To date, no one has questioned the theoretical merits of this multiplier. Even the biggest opponents like Friedman have only questioned the multiplier value, judged to be closed from 1 in the permanent income that competes with it. We will show in this first article that the multiplier is based on a faulty theory and must be abandoned. An upcoming article will challenge the permanent income hypothesis and provide a definitive conclusion to how the economy works.