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.           ...

  Come to think of it, there in the corner of economics is a hidden cross, utile or useless.   The Cross in Consumer Choice. For the purpose of giving some sense to the so-claimed “price” of x good ( p x ) in the consumer choice model, certain economists put the budget for “all the other goods” on the y axis (e.g. Samuelson and Nordhaus 2010, p.88; Hal Varian 2010, p.114). In this case, the total household income becomes the budget constraint.              Alas, they fall prey of fallacy of composition Paul Samuelson talked about as early as in 1948 ( Economics , p.9). Suppose apples on the x Axis of John Doe’s coordinate, and the weekly income on the Axis of y . Further suppose that the apple sells @ $0.5 and that Doe’s income, or spending budget, for all purposes is $5,000.              Question 1 : How many units of apples could Doe buy per week,...