The Chimera of Macroeconomics

  “ Multiplier ” as the crown jewel of “ fiscal policy ” is stillborn of sextuple misconception. There are largely two ways to illustrate the so-claimed “ multiplier effect ,” algebraic and geometric. Either way starts from a “constant” marginal propensity to consume (MPC).              Before all other macroeconomists, Paul Samuelson appears to be right, truthfully or falsely. The “marginal” for each keeps varying while that for the whole economy keeps constant. It’s the fallacy of composition , your Excellency.              Alas, “No macroeconomist is completely right,” to apply a maxim of Eugene Fama from Chicago; “Theories are approximations. Nothing is completely anything.”   Paul Samuelson is no exception falling in the trap of the fallacy he has evangelized against since 1948 to ever.   Misconception 1 . The underpinning idea of MPC (...

  Probably by now, it is surefire clear ( 明若 观 火 , míngruòguānhuǒ in pinyin ) to the rest of us that a price for each is alive and active at the moment of individual exchange. On the contrary, the price and the price level are dead and fixed at the time of accounting for the collective exchanges.   Paraphrase 1 . By saying “moment,” we mean “the shortest run”  (T -1 )  where no relevant changes take place. To be true, there in Here on Earth is no such thing as a moment  (T 0 ) . Paraphrase 2 . A price is applicable to each exchange and at the "moment" of exchange. In theory of the real marketplace, there from a certain short "moment"  of time   to the very "long run" can possibly be as many prices as exchanges are.              Again, the time never flies across (L -1 ) but it flows over (T -1 ). Paraphrase 3 . There  per accounting period  are "so many exchanges" but only...