From Cambridge to Eternity: “Change in Value vs in Quantity”

  

With “benevolence” out of question, the rest of us wear quite many economic hats in everyday life:

1)     Home or in private capacity

               - Producer and consumer of goods and services

               - Constructer of and investor in assets including human credentials

               - Owner and renter of physical and human assets

2)     At the firm in public capacity

                - The investor in and a partial owner of the firm

                - The renter of various assets, physical or human

                (Note: Conceptually, the firm does not own assets but rent/organize them.)

3)     In “the market” (read: product market) in public capacity  

               -Demander possibly to buyer

               -Supplier possibly to seller

               (Note: Some participants choose to walk away with no exchange.)  

 

In Private. The choice is between consumption now (in the current period) and consumption in the future. All the rest are instruments of convenience. The unit of account is the utility (M∙U, “M” for mass, U for value of  utility in dimension denotation). Naturally, the value metric (U) is highly subjective, yet nevertheless closely related to the time period universal in Here as opposed to Eternity.

            The rest of us never throw anything in the ditch so as to be missing in analyses of Cambridge. After all, spending time in production of throwaways is not only uneconomic but also harmful to all of us.    

The GAAP. We may not expect betterment without accounting for our activities per period as well as our stocks at of the period end. We often referred to “financial accounting,” which is another misnomer and sometimes confuses innocent citizens. Such accounting is public, not just limited to “financial”: the income statement is economic while the balance sheet is financial. Needless to say, the public accounting shall be conducted in the thaler.

 

Macroeconomics. This is supposedly about the gross domestic welfare (GDW) in the commonwealth. Apparently to be realistic, welfare shall be measured in terms of utility (M∙U), not of real quantities (M) per se. Alas, the General Practice in the particular empirical science with “real variables” is the polar opposite! Worst, macroeconomist say “real quantities” (M∙U⁰) but mean the “thin air” at best or metric-free indexes (M⁰∙U⁰) more generally.    

Irving Fisher Say. The real interest rate is defined to be the nominal rate minus the inflation rate: i.e. r= i- π, generally in percentage changes per annum (% PA).

       This might be opposed to the variation between two index numbers across a “nicely differentiable” scenario of the AS-AD model. Such a gap is not even in the percentage, as to be something like (M⁰∙U⁰∙L^-1, L for the spatial length); for instance, 3.14159x 10¹² per millimeter. ???