From Cambridge to Eternity: “Factor-hours to Production 02”

 

(From yesterday 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 consumption utilities. To be fair in Macroeconomics, GDP excludes “all final assets….,” which must be saved off of the national income accounting.   

2)     Often in Macroeconomics, we come across the simplified identity of accounting Y≡ C+ I, where Y means GDP, while on the other side C represents “real quantities” of goods and services, and “I” for “real quantities” of assets. Probably by naming inconsistently, the national economy is doomed to “secularly stagnate.” By definition, GDP perennially falls short of the identity of GDP, in “real” or “nominal.”

3)     We shall  account for the national economy as is in monetary aggregates. More probably than not, conceiving a macroscopic production function of “real stock variables” will be waste of time. “Such a function will be of no use until post mortem.”

             Yes, there are technologies, but there is no such thing as “total factor productivity.” The factor stock of the economy, definable or not, never matters to the national income accounting.        

4)     Inflation is ex post facto. If ever, the effect shalt not be adjusted by the price level. Again, “it’s the percentage change” that matters. The index such as the price level will  be "of any use to us  for now or never.”

              At any rate, the inflation is a matter of the monetary growth vs the income growth. The particular tradeoff hinges on the public choice, or political decision based on popularity all across the nation.

5)     As we all know, the governor, more like a mediator than a ruler, is not visible in the market. Notwithstanding, keeping the gate to the market she appraises, appreciates, attributes, arbitrates and announces, virtually or practically.  

6)     A few names to be corrected:

Factor → “Asset” as a still stock; collectively “the national wealth”

Production → “Creation”: production of goods/ services and construction of assets