The Chimera of Macroeconomics

  A thesis: Nothing good comes for free. An antithesis: Nothing bad disappears for free. Confused? Don’t worry: Where there is a query, there is an answer. Boys, be curious!   The Coase Theorem . Suppose a barking puppy in the neighborhood. It surely is annoying to most of us, the innocent bystanders. The barking sound is neither music nor a benefit. It simply is a noise and a disutility (-). How to get rid of the teasing or annoying (+)? There are two big ways to solve “ The Problem of Social Cost ” ( R. Coase , 1959, The Journal of Law and Economics ).              The one is economic (in the short run, as always): We buy a quieter environment, a benefit, in return for the cost of monetary payout to be negotiated on free wills of the two parties concerned. If you wish in this regard, you may refer to The Art of the Deal by the great negotiator.           ...

  We cannot have the cake and eat it too. In order to get a nice thing, we have to sacrifice another good thing. That’s easy, but for “another” being an uneconomic term. Economics is not only ordinal but also cardinal .* Consequently, we in economics usually say the opportunity cost in the meaning of the other good thing.                  *Note: Some economists speculate that cardinality may not be needed in economic reasoning (e.g. Paul Samuelson and William Nordhaus , Economics , 2010, p. 89). Alas, they fall into the trap of “fallacy of composition” (ibid, p.9).              To begin, we discuss “ disutility ,” as opposed to “ an opportunity cost.”   Disutility. Every rose has its thorns. This world is not everywhere wonderful, full with utilities. There are many matters of disutility in themselves, or equivalently painful i...

  In economics, obtaining a unit of utility is called: a gain, a pleasure or a benefit . A gain is sometimes metaphorically called “having a cake.” On the flipside, losing a unit of utility is called: a loss, a pain or a cost . A cost is often called a price , but we hereinafter reserve the latter for the meaning of “market price” in the currency unit.              Two millennia and a half ago, Confucius would have said, “There are yin (-) and yang (+). Thou shalt not con-fuse them but fuse them right.”   Enemies and foes. As the conventional wisdom has it, “We cannot have the cake and eat it, too.” Another: “No pain, no gain.” Still another: There is No Such Thing as a Free Lunch ( Milton Friedman ). The other: “People Face Trade-off” ( Gregory Mankiw ).              Let us take on the metaphor. The cake when eaten renders a special kind of utility, ...

  We have a life. First, we have to subsist and reproduce. Second on, we have a dream for the future. We have to prepare for subsistence, fertility and the dream. Where there is an end there must be a means.              We in economics call such a means “the asset.”   The asset for the short run. We consume what we produce in the current period. Macroeconomists envision, rightly or wrongly, such a production function: Y= f(L, K, N) , where L for Labor force, K for physical Kapital and N for land with Natural resources .              In our terms herein, L is the human asset, while K and N collectively represent the physical asset. The human asset is us, which is unquestionable. The physical asset is what we own , or have the property right to. Later we come back to how we utilize our assets of the two kinds. In the meantime, there are largel...

  While we are on Earth up to 125 years, we by creation shall subsist and reproduce. We need energy, nutrition, protection and spirit for maintenance of the human asset which is to be used for such purposes. In addition, we want a better future and accordingly want to grow the human asset as much more.              For all those purposes, what we physically take in is called the good and we psychologically do the service . In economics, we sometimes use the term “product” collectively to mean the good and the service: the former tangible and the latter intangible; production and consumption of the former are separated, but not of the latter.              To be precise, we do not buy into the product per se, but its utility value rendered to us. We in economics call such value of material “utility” (M ∙ U, where M for mass , U for value of utility ). Here, ...

  Believers in of “ ineffective demand ” have imagined such otherworldly ideas as “paradox of thrift” to “ secular stagnation .”   Paradox of thrift. According to Thomas Malthus , we are presupposed to throw whatever unconsumed into the sea  sometimes also called “ Saltwater .”              Cómo es eso ? With the savings from consumption, the rest of us in the rational mind have so many things to invest in. You know what, savings equal investment when exogenous to macroeconomics or outside of Cambridge. There out there in this world is no such thing as a "paradox of thrift." On the contrary, as Daron Acemoglu and James Robinson world-famously verify what fails nations is a lack of motivation to thriftiness or indolence in saving.              As we are more than well aware, the cost of the present ( C ) is the future ( I ). We as nobody would n...

  In a sense, macroeconomics is founded on the sham notion of “ ineffective aggregate demand .” There in Here on earth, “There ain't no such thing as IAD ” ( TANSTAIAD ).   By definition , 1)      “Effectiveness” means the right means to the defined end. In other words, all demand is effective as the end of each or all: I demand this because I demand this, no questions to be asked. Put differently effectiveness addresses the kind as opposed to efficiency or sufficiency the degree. Each and  every demand is justified and entitled in the Republic.  2)      In economics, “demand” never means wish, hope, dream, admiration, preference, trust or firm belief. The invisible and accordingly invincible hand does not let free-riders in the market. “The empty -handed, thou shalt not enter! I’m the only invisible in my territory.” 3)      In each market, the demand curve is always separated from the supply cu...

  There are two broad categories of reasons why we compete: push (yin) and pull (yang). By nature, first of all, we love competition. Otherwise, we would have never created competitive games , plays , contests , races and the like. Most of us are pulled by competition, while a few are fooled not only once but also “so many times.” Incidentally, “so many” means excessiveness according to the Confucian dictionary.              The second reason of “push” is economic, a must as for subsistence and pleasures. Needless to say, economic rationale is of our main interest. Here again, there are push (-) and pull (+). Unlimited desires. If our desires were limited, we would have been, continuously over and consistently across, living in the hunter-gather age far from belonging to or yearning for “ leisure class .” Notably again, “consistently across” (L -1 ) is to macroeconomics , what “continuously over” (T -1 ) is to economics .      ...