Fallacy of Composition: Chimeric of Variable and Parameter
A great problem of economics is an abundancy of misnomers, misleading, oxymoronic or outright deceptive. One out of so many is the so-named “exogenous variable.” It should be called parameter instead. The two of “variable” and “parameter” are different species, period.
By definition in mathematics all variables
are endogenous, or internally
related. On the contrary, a parameter is external, or “exogenous” to the intrarelationship.
By practice in mathematics, in addition, all variables and parameters go naked,
with no dimensions of any kind and no scales of any degree. Neither a specific name
nor a title, either. By the wayside, such names as “dependent” and “independent”
of variables are sheer “in name only”: equations are silent to the causality of science.
As opposed to mathematics, the
nature and the economy have dimensions. Therein, all variations, due to
actions, reactions or interactions, shall be over the time (T-1); while
on the other side differences and gaps from the standard must be across the
space (L-1, L-2 or L-3). Yes, when in actuality,
a variable runs over the real or practical time; while on the other street a parameter
walks across the nominal or virtual scenarios.
Incidentally, either the “short run”
or the “long run” when exogenous to Cambridge never walks across (L-1)
but it runs over (T-1). To the rest of us the time never flies but
it lapses. In the first place, metaphor is no reality: after all, imaginary is
not real
The following cases are parametric with
no relevancy to the market of anywhere. Frankly speaking, the market is defined
for a certain good or service of standard unit (M1 never M0);
in a confined community (L-2); over the specified accounting period
(T-1).
(Con)-fusing a “variable” (T-1)
with a “parameter” (L-1) as in the “consumer choice model” etc., would
be an insult to the injury of “fallacy of composition.” Well, we “talked about FOC
so many times over.”
17)
Substitutive Goods
First, this may be imaginary or
subjunctive: If there were a close substitute, the demand would have shifted
down already in the same period of accounting. This cross-case comparison (L-2)
of imagination is exactly the case of IS-LM and AS-AD models in macroeconomics. “Model,” well, what kind in the first place?
Second, such comparison may be due
to a change in the “preference,” or taste as usually dubbed, of the consumers
at large. Then on, we enter into a different period, because all changes in the
reality are across periods or more simply over time (T-1).
Third, to be honest a “substitute” is out of economics
question from the beginning. Suppose any of us steps in Whole Foods Market and is
interested in the Golden Delicious of apples. Can she even think about a
substitute in the Market, not to mention all the substitutes in town?
Don’t when in the market tease or
annoy substitutes! As a matter of fact, this is what Alfred Marshall warns economists against a premature jump in the so-called Giffen good (1920, p.132).
Why in the first place Irish “potatoes” vis-à-vis “meat”? Why not against “venison”
as mentioned in Adam Smith (1776)? What quality of each in the second place? What
if partially rotten, rat-bitten or just obsolete?
How many or much in quantities on the
shelf of Market, in the third place? Is it milligrams of one brand vs
metric tons of another brand? How about a package of dozens vs a pound of the mashed? Incidentally, we the humans have invented all different types of scales for
the sake of accounting for even more diverse economic activities.
18)
Complementary Goods
Ditto,
for the sake of saving Private Time, the ultimate currency to the rest of us.
As
opposed to the market paradigm, what is the consumer choice model, Alchemy, a
Chimera or chimeric Alchemy?
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