From Cambridge to Eternity: “Marginal Propensity to Consume 05”
Let us get back to the reality from
Cambridge macroeconomics. First of all, we must admit that the gross domestic
products (GDP) and the gross national income (GNI) are estimated in the national
income accounting. Second of all, the so-called “financial accounting” as such is
designed to be conducted with many names given in GAAP (for generally
accepted accounting principles).
Trivial
yet thirdly, GDP and GNI are a matter of naming. We for the sake of convenience
disregard the difference in the two names, “domestic” and “national.”
Nominalism of “Unit of Account.” To begin, the thaler in
virtual and the dollar in real, both as unit of account, are a matter of
naming.
More critically, all accounting, particularly “financial”
shall be done with the name of “money” as currency; the name shall be continuous or
otherwise “fixed” over the period of accounting. Some of us might suggest that that
be in the genuine sense “monetarism” as opposed to nominalism. True, but “money”
becomes “nominal” when convenient in macroeconomics for the sake of building
models, except for the “liquidity preference model.”
There
are, at any rate, largely two reasons why accounting must be “nominal.” First, there is no alternative to summing up,
for instance, three real oranges and five real apples in whatever period of
micro-accounting. Second, we again have TINA to aggregation of, say, three
oranges in the first week of accounting all the way to the 52nd week.
In the first place of the republic, the monetary price is supposed to fluctuate
over the year under the auspices of FTC (for Fair Trade Commission).
GAAP. The accounting periods
are named for the sake of convenience; for instance, a week for apples and
oranges, a quarter for labor incomes, a year for GNI and a couple of years for
Model T.
Most
critically, the division of “consumption” (C)
and “investment’ (I) is a matter of
naming. To be specific, “consumption” is the common name for four different
kinds of spending for, namely, “necessaries,” “conveniences,” “luxuries” (from
Thomas Malthus, 1936) and investment. By nature, spending only for “luxuries”
is entirely for consumption, or “consuming away.” On the contrary, necessaries are equivalent to
periodic “depreciation reserve” for the human asset. Expenses for mental
education and physical exercises are mostly investment for the future. Finally,
“conveniences” often times is in order to
save time in various activities, which is yet another type of investment.
There
is additional nominalism in accounting for the physical asset. The final goods
for human “consumption” are products when sold in the current year but become
assets when stocked to be sold as products in the future. “Depreciation reserve”
is also a matter of naming. Here to note, the names “depreciation” and “inventory”
per se are for the sake of convenience as well.
Last of all, “financial” accounting is a name of convenience. Yes, “money” belongs to Finance, but “activities” to somewhere else such as Economics. Economic activities in particular are accounted for in Income Statement (T-1) with “value added” at the bottom line, while financial “transactions” in Balance Sheet (T0) with no bottom line at all.
GDP (Y) for Eternity. The
monetary GNI per annum is very much
real and practical. On the other hand, individual prices of apples, oranges, widgets,
gadgets and the like keep changing per
annum. As such, the aggregate price (P
for price level) never stays constant per
annum if in Here. All in all, the
real GDP (Y), as defined to be the
monetary GDP per annum divided by the
price level out of blue, must belong
to Eternity where time never lapses but it flies.
The
rest of us would say with a grain of relief, “Thank goodness, we the nameless
can always hide ourselves anywhere in the republic, much like “solid liquidity”
(read: legal tender) can in the “Failed Nations” of “tax abuse.” Yes, the hide is for the sake of shunning the apocalyptical GDP.
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