The Chimera of Macroeconomics

  To begin, we might in various regards replace the term GDP (gross domestic products) with something like ADW (aggregate domestic welfare, excluding assets) or AVC (aggregate value created, including assets). Here again, “value” in economics means utility (M ∙ U) as revealed  in the market and  stated  in terms of sovereign currency bill  (U ∙ m) .   Economy vs Industries . Adam Smith refers to the butcher, brewer and baker rather than the farmer, miner and fisher. To double-check, the former group represent the supplier  of a  final good while the latter industrialists preceding the supplier.                  In the first place, “intermediate goods” are out of question in economics. The reason is that they represent value created through the so-called “supply chain” ante the final distributor. After all, “the market” is for economy only of final goods.   ...

  Utility and Value. In economic life, “value” means the utility to be appreciated at consumption; such utility (M ∙ U in dimensions) is the energy that keeps us living on. In the public life, utility is measured with the legal tender (U ∙ m, “m” for legal numeraire). More specifically, the market price (U ∙ m) is the proxy of utility and value (M ∙ U) of the object traded, expectedly, virtually or practically. The Asset. The stock of asset represents the penitential to become a creative power when hired and “animated.” In other words, the stock stands still until employment. Only those units up to the job  has the actual creative power.             There are two arch-categories of assets, namely, human and physical. The land was originally a “natural” endowment but is in modern times not different at all from the “capital stock” ( K in macroeconomics) as tradable asset.        ...

  ( F rom y esterday on ) The Economy-wide Production Function, as logical : “The Aggregate Value Created per annum ” = the collective sum of [(monetary efficiency per individual fact-hour) multiplied by (the running hours per annum specific to the factor)] → Definitive insensibility: Taking average per annum of any aggregate of the stocks such as L ,  K and N , or their running hours   GDP (for Gross Domestic Products), as in Macroeconomics : According to Gregory Mankiw ( Principles of Economics ) among others:   “GDP is the market value of all final goods and services produced within a given period of time.” To  be logical :   Y (GDP) = the production function of GDP per annum = (“The Aggregate Value Created per annum ”) subtracted by (the Aggregate Value Created per annum of assets)         Afterthoughts : 1)      To be fair in Economics, goods and services are for consum...

  A Few Mathematical Terms              Variable: a quantity of interest, rather varying across space than changing over time              Constant: a quantity not imagined to be affected by variables              Functional equation: the effect variable on the left, the cause variables on the right                                                After all, the left owes its existence to the right.     The Production Function in Macroeconomics: Y= f((L, K, N)              In the first place “exogenous” to mathematics, there is dimension ...

  By providence, we human beings cannot stay on Earth for long or short without consuming utilities of various kinds and that periodically. By nature, on the other hand, our desires for “conveniences” and “luxuries” are unlimited and consequentially keep us hard-wired with self-interest. We are always hungry for utilities as defined in our dictionary; the word saturation to “stagnation” is not in our  dictionary.              One of the boundary conditions of life is that the time ante Eternity is limited to 125 years at the longest. All in all, we shall try to save time in fulfilling our demand for utilities of unlimited kinds. Making, producing or constructing a thing of no use, real or nominal, must be a genuine “waste of time,” one of the Original Sins: “Homo Sapience, thou shalt not be prodigal on thy time in Here.” The Smithean Maxim . Quoting Adam Smith, the Harvard economist Gregory Mankiw says, “Consumpti...

    Chapter 1 The Economy in “Nominal Money”              Suppose John Greedy McScrooge puts one billion dollars under the mattress on the beginning of Mach for the purpose of “saving” (for the future). Originally, the money was earmarked to be spent in the month for widgets. His individual market demand curve for the widget suddenly disappears. There is an interspatial gap of spending between the two scenarios, original vs actual.              A classical economist would account for such a variation in March: ① the aggregate demand curve shifts to the left; ② the market price declines; ③ the real quantity traded, or sold and bought, declines; ④ accordingly, the suppliers in town who happen to be “rational” collectively reduce the “real quantities” of production; ⑤ notwithstanding, the market is cleared in equilibrium; ⑥ everybody including McScrooge i...

  To survive, we need to account for performance of the past period, the short run (read: the current period) and the long run (so many coming periods) under the Earth standard. As such, performance as in Here shalt not be as at moments, with dots, or in the “thin air” to vacuum to Eternity. In other words, we in the first place of accounting must define the boundary conditions in definitive metrics. “Indefiniteness” thereof renders nothing.              Mathematics is invented largely for the sake of convenience  in  accounting. On the other hand, no two things in the reality are perfectly equal so as to get mathematical operation precisely true; for example, every natural unit of apple is different from all else. If so, the simplest equation of all, 1+ 1= 2 , is not quite “real” but rather “nominal.”              With the above said, we might well...