Non-sense and In-sensibility of the “Cambridge Quantity equation”

Amazingly outlandish is the equation proposed by J. R. Hicks in his 1937 article titled “Mr. Keynes and …” He is pointblank that J. M. Keynes was by profession neither a researcher nor an economist. No wonder there was in the particular room of 1940s in the U.S., there was only one non-Keynesian who happened to be a Commentator named J. M. Keynes.

             Now let us put Professor Hicks’ equation on the table: M^d= k∙P∙Y. where M^d represents “liquidity preference” aka “money demand,” k a constant and P∙Y the “nominal GDP.” Keynesian or not, the equation is a great counterexample of “Sense and Sensibility.”

Nonsense No. 1. Misnomer. Money is anything but to be demanded. There is neither a reason nor a way for the household to “demand” money. None would like to “buy” money with money as the medium of exchange in all trade above ground. If ever, it would be extremely uneconomic for any household to trade legal tender for money, liquidity, fluidity or an exotic medium of exchange such as Yap stones. On the other hand, the only ways of securing money is working productively and selling a physical asset or the human credit.

             There in economics is no such thing as the “money market,” in the first place.

No. 2. Dimension Aberration. The left-hand side of the equation is a stock (T⁰ in time dimension) to be defined as of a moment while the monetary GDP (P∙Y) is per annum (T^-1). To be algebraically sensible, the k on the right must be a variable representing the time duration (T¹).

             Exogenous to Cambridge, we never let a constant bridge the distance up to the goal line and the running speed all through. For instance, 500 miles should in no case be added to 20 MPH (miles per hour). The two must be linked with a duration variable. This fact is more than clear to Peter, Paul and Mary, no economists in any sense.

Np. 3. Indefiniteness. Without defining the accounting period, none of the notations in the equation can be definitive. Hicks and disciples never define the time scopes of M^d, k, P and Y. As of a certain moment? Well, the “moment” has never really existed since before the time began.

             Probably, Keynes, Hicks and other Keynesians are hypnotized with the powerful catchphrase “short run.” Absolutely no doubt we are all dead in the run longer than two centuries. The antithesis, unfortunately: some of us are dead in the short run, may it be a minute hence. Apparently, “long” and “short” are a matter of degree, never of kind. We in other sciences are to theorize on the kinds, not the degrees.

             As we all very much well aware, the Newtonian gravity theory is a rough approximation. With a “strong” vs. “weak” wind, the real outcomes are different. Nevertheless, we do not theoretically blame the wind to be too strong or too weak. Probably, macroeconomics is an orthodoxy hinging on a dubious difference in the run. Is a single year short or long? How so?