Financial instrument: Never an Asset


On the basis of discussions on the asset, we make some sorting-outs:


1)     Kinds of asset

- Human

- Physical: machine and land (to site or soil)

2)     Kinds of power.

- Human power

- Mechanical power → “Machine power”

- Brain power

- Soil power

3)     The purpose of rental (unit of rental)

-Occupation: Site (site-hour)

-Creation: Power (person-hour, machine-hour, acre-hour)

→ The creation function q= f(p-h, m-h, a-h)

 

Problems of transaction costs. We have to pay transaction costs of various kinds while we stay in Here, as opposed in a Dream, a Preference, Eternity or Cambridge:


1)     Commercial transaction costs, while “value being added” of trade

- Hitting the triple coincidences, among other (private) costs:

. In kind: I have to offer what you would bid.

. In degree: I have to bring a fifth of Bovine for your Swine in life.

. In site: I have to bring 1/5 Bovine in life to wherever you want it.

2)     Industrial transaction costs, while “value being added” of industry

- “The nature of the firm”: a firm created to save these (public) costs.

. Information costs, also called “the costs of credit check”

. Contracting and enforcing costs

. Transportation costs

. Moral hazards

. Administration costs, or overhead costs 

3)     Financial transaction costs, while “value being balanced” through Money, Banking and Finance (back to this later)

- All those (private) costs in transforming money to and from financial instruments

4)     Risk premiums, while “expectations being made”  

- Everywhere as above (highly private)

- Always except for when “time files like an arrow (L-1∙T0)” in Cambridge

 

Saving Private Cost O’Ttransaction. We use various instruments as follow:     

1)     Money is an instrument of convenience to be used in trade of products

2)     “Financing” is an instrument of convenience in the inter-temporal allocation of money to be used in trade of products.

3)     Financial instruments are instruments of convenience for the sake of portfolio management.

4)     We prefer money to “anything of some use” only for the sake of saving private costs of commercial and financial transactions. 

 

Science in kind. Idealizing away, we need neither money nor financial instruments, both of which are instrumental to saving transaction costs. These are no more relevant in building abstract theories of economics than frictions are of physics. Both are veils, at most.

             An interesting question, incidentally: Have you ever seen any macroeconomist declare how long a run is “empirically” wrong? Don’t get us wrong: Only macroeconomist claim that both “long” and “wrong” be a matter of true or false. Many of them call macroeconomics, “empirical science,” on the other hand. The truth:What is true in economics as a science for the long run must be also true in the so-called “macroeconomics” for the short run. "We never die all, we just fade away in the long run of 125 years."  

             Again, the degree, such as long and wrong, never makes a science but the kind such as true or false does. There exogenous to Cambridge is no such thing as “how true is true.”


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