Philippine E-Journals

The Foreign Trade Multriplier Reconsidered

Elmer A. Abueg

Discipline: Economics

 

Abstract:

Not a few economists claim that the use of the "multiplier" in economic analysis was first introduced by R. F. Kahn (1931, pp. 173-193). Indeed, Keynes (1965, p. 113) himself shared this belief. However, a deeper look into the history of economic doctrines would reveal that "the idea of multiplier effects is rather old", dating back as early as the period of the business cycle theorists (Hegeland, 1954, preface). Jevons for instance paved the way which inspired Bagehot to the first clear statement of the multiplier principle. This later on led to a precise formulation of the theory by Alfred Schwoner in 1930. Bohm-Bawerk, during the period, also made use of the principle in tracing the cumulative effects of capital formation. So did Wicksell, Cassel, Robertson, and others. However, these economists did not attempt to estimate the quantitative effects of capital accumulation as they concentrated more on the direction of subsequent effects of new investment.