From Cambridge to Eternity: “Life is Home”

 Mr. Robinson is the economy all by himself in Crusoe Island. As a result, life is at the same time home and in the macro-economy.

Economics. He has no opportunity whatsoever to engage in trade which needs two sides, the credit and the debit. Consequentially, “the market” is down with “trade after specialization.” Nevertheless, he is rational enough always and everywhere to mind efficiency, or “economy” if we will.

            On one hand, the time (read: the period, never the point) is his currency. On the other hand in Island, there is no alternative in accounting for efficiency to measuring his utility acquired per hora (M∙U∙T-1 in dimensions). In the economy or as for individual economy:

            Principle 1. Time and space are limited.

            Principle 2. Nothing utile comes for free.

            Principle 3. Robinson the rational thinks at the margin.

            Principle 4. His desire for better life on Crusoe Island is unlimited.

An academic call: Where the two complementary adjectives were the same, there on Earth would have been no such thing as Economics. (Note: The top three Principles are reworded from Gregory Mankiw’s).

Cross-sectional Choice. He has “near-indefinite” (borrowing from Akerlof and Yellen) things to choose from in the providentially-given 24 hours per day. When choosing one, he intuitively yet carefully compares its utility with the second-best utility of all as at the very moment.

            As for him, there everywhere is the single best opportunity forgone, subject to variations across occasions and changes over time. Put it differently, the “opportunity cost” can possibly be anything but “liquidity preferably hoarded.” How essential would solid or thin-airy “liquidity” be to Mr. Robinson ante mortem?  

Inter-temporal Choice. Fortunately or otherwise, Mr. Robinson’s creative power does not match with his demand for utilities year by year through life. He must when growing or mature prepare for the surefire decline to River-crossing at an uncertain moment. “Precautionary” Robinson more or less certainly leaves some assets most mortem.   

“Time Value” of Time. He in mid age is pretty much but not completely sure that he will be alive for the coming decades or so. Dependent on his rationality, he prefers to consume now a unit of a thing at the margin, a natural unit of orange for example, to the approximate same thing in the future by the “time value of money” as called in the discipline of Finance. 

          Plausibly, the aggregate time value of money in the modern Anglo-America is 2% PA; or, we may assume as such for the sake of convenience. Again, the time of Robinson is his “money” as called in the meaning of currency in the empirical science of Macroeconomics.

Another Academic Call. Assumed to be an average human being, Mr. Robinson’s “marginal propensity to consume” (MPC for short) is (2/ 100) per annum,. That’s because the time value determines the divide between consumption (C in macroeconomics) and saving (S), when individual differences in lifecycle are averaged away in the aggregate population.


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