Velocity Wanted: Conveniently in Cambridge
“In the short run, we are not all dead.” As such, the rest of us must take the velocity of money ( V in macroeconomics ) into account as far as the earthly economy is concerned. If history is any guide, by the way, we may learn more from other people’s failures than from their successes. Before looking for velocity, we quickly review how conveniently it is lost in Cambridge Macroeconomics . Constancy of Velocity. By being assumed to be “constant” as in the “ Cambridge Quantity equation ,” M = k ∙ P ∙ Y , the velocity ( V= 1/ k ) plays no role whatsoever in macroeconomics. More simply, the velocity does not only lose its citizenship in Cambridge but also its identity rendered by the Classical quantity identity, M ∙ V ≡ P ∙ Y . By design of macroeconomists, then on, the economy-wide issues are all about M , P , and Y . On the other hand, the rest of us are more than well aware that macroeconomics is for ...