The Chimera of Macroeconomics

  The rest of us find on the shoulders of Irving Fisher from New Haven and William Baumol from Princeton as follows: 1)      Money is useless for any other purposes than “purchasing.” We hoard it, if ever, in solid cash or thin-airy demand deposits to utilize as the liquid currency, aka GAME (for generally accepted medium of exchange), at the time of exchange . 2)      Like any other “ People Thinking at the Margin ” (to Gregory Mankiw from Cambridge ), the rest of us think at the margin and keep amassing money to the marginal dollar where the benefit of hording equals to the cost .   3)      Typically in Princeton, the collective sum total of individual liquidity preferences in preparation collectively for P ∙ Y (“ nominal GDP ”) is found out to be to be: M d = ( b ∙ P ∙ Y / 2 i ) 1/2 . 4)      Owing to Paul Samuelson from Cambridge, the rest of us are very much well aware that...

  The horse is utile and fertile. The donkey is utile and fertile. The mule is utile but infertile. According to a celeb (ex)-columnist, the IS-LM model “makes a lot of sense.” “Sense,” in what sense is it? Probably he means “utile and fertile.” Alas, such a sensible saying as “The sun rises in the east” might be conventionally utile but “empirically” futile. No more is the supposedly “sensible” IS-LM! Frictions and Transaction Costs. By naming, a product, good or service, means utility for the present while an asset for the future. As David Ricardo from London illustrates, on the other hand, “trade after specialization of production” is the first of “win-win strategies” as called in business. [Auto-correction: That’s a compromise , not a strategy; by naming, there is only one winner in every war .]                In theory, we don’t need money at all according to the Ricardian “theory” as such. In a sligh...

    According to Irving Fisher from New Haven, money does its job while moving across two hands (L -1 , L for length in space dimension). As a natural consequence, each piece of legal tender sometimes called “ liquidity ” makes a certain number of turns per annum (T -1 , T for time). The aggregate pieces at all different rates of moves would yield the growth domestic products per annum ( Y in macroeconomics) Spending to Turning . The gravity on Earth creates energy by attracting an object before getting a work done, while the gravitating force of legal tender calls in utilities for human survival and higher-level welfare. The object (“M” for mass in dimension) never dies naturally; much likewise legal tender (U ∙ m) never fades away tenderly. Oh, we mean the principle of conservation!              Where there is spending, there is getting spent. When anyone in the meantime eats, wears, burns or prints any ...

  David Hume or his disciples might well have named “quantity equation” as “quantity identity.” As predicted by Confucius ( 孔夫子 , Kǔng Fū-dž in pinyin ), the misnomer, seemingly trivial, has misled people particularly in Cambridge and let them suggest the “Cambridge Quantity equation” as keystone of macroeconomics (e.g. John R. Hicks , 1937).              As a matter of semantics, after all, an “equation” can represent a theory, but an “identity” cannot until the time of crossing the River. Frame of Reference. In mathematics jargon, an “equation” consists of multiple “variables.”   The “velocity of money” could be called “a variable” if in the “quantity equation,” that is, M ∙V = P ∙ Y (as opposed to M ∙V ≡ P ∙ Y , an accounting identity).              Unfortunately, there exogenous to imagination is no such thing as “velocity” of money. The re...

  <Questions for Review of “Money Demand”> 1.      What was “money” historically? - Commodities: shells, stones, copper, nickel, silver, gold and so on - Classical economists: a veil - David Hume among others 3) : the annual average 2) of monetary outstanding               - John M. Keynes among others: the outstanding balance as at a moment of interest - John R. Hicks among others 4) : something that is a “constant” fraction (or multiple) of                                                                          the annual “nominal” income: i.e. M= k ∙ I = k ∙ ( P∙Y ) 2.      How do we calculate the average?             <A> There ar...