The Chimera of Macroeconomics

  In a sense, macroeconomics is founded on the sham notion of “ ineffective aggregate demand .” There in Here on earth, “There ain't no such thing as IAD ” ( TANSTAIAD ).   By definition , 1)      “Effectiveness” means the right means to the defined end. In other words, all demand is effective as the end of each or all: I demand this because I demand this, no questions to be asked. Put differently effectiveness addresses the kind as opposed to efficiency or sufficiency the degree. Each and  every demand is justified and entitled in the Republic.  2)      In economics, “demand” never means wish, hope, dream, admiration, preference, trust or firm belief. The invisible and accordingly invincible hand does not let free-riders in the market. “The empty -handed, thou shalt not enter! I’m the only invisible in my territory.” 3)      In each market, the demand curve is always separated from the supply cu...

  “ 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 (...

  When you come across a fork on the road, what are you gonna do? Take it, or so says Yogi Berra . What if a cross on the road? Just take it, stupid, or so would Berra say. What if it’s a Keynesian Cross ? Umm……, please ask someone else, or so would even Yogi say. .              Many innocent students of macroeconomics have hard time understanding the Keynesian Cross. Don’t worry; be happy, “You are not alone.”              Generally speaking, macroeconomics is for the heavens; naturally, it is not only unknowable to each student but also arcane to the rest of us all. Particularly, we’ll never know what the shiny “Keynesian Cross” is like until post mortem . We begin with another lackluster cross.   The Cross in the Market. Probably, most finance-savvy high-school students of modern times are well aware of the demand and supply curves.   ...