From Cambridge to Eternity: “Robinson Crusoe’s Currency”
Suppose
Robinson Crusoe’s life on the Island.
As usual, he on arrival comes across
good news and bad news. The bad news is that he finds himself empty-handed: he
owns no physical capital. The good news is that he is all by himself and that
he owns bountiful human and natural capital.
Ironical but true, he is enormously
wealthy but extremely poor: the former is a matter of assets (T0),
while the later productivity (T-1). A lesson: Consumption is not a function
of wealth, contrary to the general practice in macroeconomics. To be
mathematically correct, before consumption we have to differentiate the wealth variable
with the time variable. After all, production to consumption (T-1)
is to Economics what wealth is to Finance (T0). Don't mix 'em.
Like any other creature in Here, Crusoe
is endowed with 24 hours per day. He wakes up early in the morning and searches
something to eat while spending some time. Cherries are abundant but his demand
therefor declines unit by unit because his stomach capacity is limited and
because he has many other things to do. When it comes to foods, he makes
balance among various marginal benefits available; more specifically, the utility of
his choice is nearly the same as the best forgone opportunity. He always and
everywhere stands at the margin of some kind.
Appetite gratified, he takes some rest, one of the two most essential services
in life: the other is of course sleep.
He never thinks either of the two, may they be called “leisure,” to be wasteful
of time. He sometimes jogs, runs, hikes and swims partly for the utility in the
name of “fun” and partly for exercise by way of investing in the human asset.
When hungry for fish fillets or meat, he spends some time making
coarse-yet-convenient instruments for the sake of catching “live stocks.”
Around dusk, he prepares an instant place to sleep on. Each and every activity
or inactivity costs the currency of time.
He sleeps dreaming a better future
with ever more and ever better utilities. Particularly for that purpose he with
a short or long view stacks up human and physical assets with time saved out of
the consumption purpose. For him, the choice is without exception between the present and the
future. As such, savings are no less for the future than the investment is.
Equipped with the three R’s, he is well aware that anything unconsumed equals
investment for the short or long run.
In the Dictionary.
There are no such things as: saturation of desire, throwing utilities in the
sea, waste of time, trade, money, and so on; ineffective demand, liquidity
trap, paradox of thrift, the Keynesian cross, the multiplier effect, secular
stagnation, a cross-sectional time dimension, the Slow growth, and so forth
What is in: time, utilities, human
asset, physical assets, goods, services including leisure, production,
consumption, saving-cum-investment, insatiable desires, thinking at the margin,
currency, and the like. “Currency”: the
means beyond control yet the most utile to the end.
The time (period) is the most basic
currency as for Robinson Crusoe. What for you?
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