Back to the Future: “Please do not Tease or Annoy the Marginal”

 

Thinking at the Margin (from Gregory Maniw). We think of each and every economic issue always stepwise in terms of small-yet-recognizable units. Put it differently, we care about such units because managing unrecognizable matters would be sheer “waste of time.” We the un-famous would never mind, for instance, what the answer is to the problem: 3 micrometers +5 nanoseconds= ?, and the like, effectively everywhere in macroeconomics.

             A case in point: Both terms of the equation “at the margin,” M^d- (k∙P∙Y)= ?; or “What is M^d (at this moment) minus (-) the k fraction constantly of the nominal GDP (P∙Y hoc  anno)?

             With the above said, at any rate, we usually “think at the margin” and choose the largest “bang for the buck” of all goods, services, assets, things, matters and so on so forth.

Unit of Account. Indebted to our cognitive limit, there are “indefinitely” many units of account as far as “real quantities” are concerned. Blessed are we to have the sovereign currency unit so as to account in name thereof (U in dimension) for utilities (nominal U∙M as opposed real “M” for mass).   

             Utmost conveniently, we can sum up most everything im-private in the monetary terms (m∙U, where “m” for monetary numeraire). In other words, we can and do choose $, ₤, € and the like as “unit of account” in the more or less public life.

Unit of Period. In various capacities we surely do conduct the accounting, which in turn must be period by period. Come to think of it, each and every accounting period is “marginal” on its own. On the contrary, how often and how widely would economic activities over the past 10 years be current for the rest of us for the rest of our life?

             See, we told you so: We seldom say “all across the past 500 miles” or “all over the past 20 hectares.” Our appreciation or performance accounting if in aggregate is usually per certain unit of time and most everywhere per certain unit of space. Aha, per unit represents the “marginal” Gregory Mankiw talks about.

The Private Accounting. Home, we are producers and consumers with the time to be spent therefor as the fundamental currency. Only in pursuit of efficiency, or obtained utilities per hour (M∙U∙T^-1), we join “the market” in economics and “the job market” in plain English. The currency in these two markets is of course “legal tender.”

             We come back to home life and the job market later on.

Accounting of the Market. To begin, we have clearly to name at least four matters in association with semi-public trade in the market where the two hands of the exchange do not know each other. The buyer of meat, bread or beer, for example, is not supposedly related to the respective seller.

            No. 1: the product, say, the “cut cookie.” No. 2: the unit of real quantity, say, the “cut” in the sellable whole food so as to be counted in non-fractional numbers. As such, half a cut, a tainted cut, a rat-gnawed cut and the like is excluded; not to mention a mathematically differentiated infinitesimal cut or the integrated (cut)². The cut is possibly “squared” physically, but never mathematically.   

             No. 3: the spatial boundary, or a unit community, say, the city of Cambridge. No. 4: the temporal boundary, i.e., a unit period of accounting, say, the 36^th week of 2525.   

             Here, we may note that the Whole Unit of whatever under the current consideration is called “marginal.” For instance, the week under discussion is the marginal week; the quantity traded in the week is the marginal quantity traded in aggregate of the market.

             Don’t mix ‘em together, the private accounting in time and the market trade in legal tender. For (counter)-example, the “consumer choice theory” has nothing to do with the market.

The National Income Accounting. We have only one Y, C, I, G and NX each in the equation per annum. Therefore, all the four denotations are “marginal.”

             On the other hand, all shocks, exogenous to the war room, must absolutely be over the time. In the real battle field, or the war front more precisely, of the economy, any comparison must be over the collective time. In the first place, a Plan B or the like is everywhere ex ante. Thus, there in the on-going aka “flowing” realty are no such things as cross-sectional gaps in any of the five given letters.

             We call the over-time variation the growth, while the cross-sectional variation a gap. Do not when in Here mix them together, whether “in the short run” or “in the long run.”   

             A concluding question: What do you mean by “marginal propensity to consume”? Oh, yah, the economy of Eternity crosses multiple sections, and  that many times over, primarily because the time there flies across.

             In the meantime while the rest of us are in Here, “please do not tease or annoy” the marginal.