Fallacy of Composition: Accounting for Activities

 

We in the physical world have three ultimate kinds of resources, viz. Time (T), space (L³, L for Length) and Mass (M). By definition, resources are limited. Limited in what sense? Of course vis-à-vis human wants, or “necessities, conveniences and luxuries” Thomas Malthus talked about (1836).

             See we told you so: Economy (经济, jīngjì) in the meaning of “efficiency” is a necessity in life of us the human. “Economy” in what terms? Of course, Utilities per hour of Time (M∙U∙T^-1); whereas Utilities encompass necessities, conveniences and luxuries; whereas the time is our ultimate currency in Here on Earth. Probably, the Malthusian “indolence” would be a type of convenience or another type of luxury; so might “leisure” be. Oh wait, we when in Economy need a fourth dimension of accounting, the Value of utility (U) W.S. Jevons talked about (1957 posthumous).

             In sum at the end of the day, we in the economic world have four dimensional categories: T, L³, M and U. Other “exponents” than 1 or 3 of the dimensions are only for the sake of accounting. For instance, L⁰ for a dot, L¹ for a line and L² for an area which do not literally exist. Likewise is T^-1 for “per (/, the slash) defined period of time”; for instance, the gross national products per annum (Y in macroeconomics). Incidentally, the rest of us as opposed to certain macroeconomists are well aware that the exponent or the logarithmic coefficient must always go naked (T⁰∙L⁰∙M⁰∙U⁰).

             Wait again, utilities (M∙U) are not necessarily from visible mass (M) but also from intangible services (M); thus a “valuable service” is in the dimensions M∙U, as well. In a sense, “M” in economics is for Matter rather than mass.

From Indefinite to Definite. The human population is spread all over on  Earth. The human wants are indefinitely diverse in kind and degree. Equally diverse activities do take place at any moment of life.

             Now the first necessary condition to “efficiency accounting” is definition of boundary conditions in temporal (T), spatial (L) and material (M). Take the private life for example. We need first of all to define when, where and what. Take the communal market for another example. We need first of all to define when, where and what. Take the national economy for a third example. We need first of all to define when, where and what

The Matter of Utility. No doubt utility is subjective. By definition, subjectivity is beyond accounting or public accounting more precisely. A lining in the cloud: In modern times we live in a social and cultural community, a political state and the market economy. Now we can measure economic activities with the legal unit of account such as $ or €.

Measurement before Accounting. As a matter of technicality, we have to measure before accounting. In measurement we use all different metrics in dimension and in scale. A great caveat: Terms of different metrics are not addible. In the first place, terms of different dimensions are not comparable; for instance, 5kg+ 20 sec= indefinite. In the second place, differences in scale are not addible but nevertheless manageable; such as 5m + 20 cm= 5.2m= 520cm.

The (National) Economy for Accounting. Largely because human activities are indefinitely diverse, we shall measure everything only in monetary terms. Precisely because the economy is organically diverse, the only way of measurement is summing up each kind of activity all across the nation into a certain “aggregate indicator”; such as the “nominal” Y, C, I, P in average and M in average, each per year (T^-1). To the single indicator per kind, “There Is No Alternative,” as the Great British PM “Laura Norder” famously talked about. 

             Macroeconomic variables on a confined plane (L^-2)?  Must be kidding!

             No matter what in macroeconomics, there is no such thing as “marginal,” either; or equivalently, “Each is all” in the macro-economy. Yes, of course, there would be only one economy in “Principles of Political Economy” and that in “Theory and Practice.” 

            In fine, don’t forget to remember the time dimension (T)! And that always and everywhere.

 

TO THE MARKET ECONOMY.