The Chimera of Macroeconomics

  The term “ arbitrage ” is popular in finance largely in the meaning of taking a risk-free benefit from two different prices of a utile object. Somehow in economics, the term is almost unheard of. Instead, people are said to go for it, when a marginal benefit (MB) outweighs the marginal cost (MC); where, the MC means “foregoing the next best of all.”              We, the nameless, are particularly serious about the last point. For instance, the MC of “ liquidity preference ” is: the most desperate real want (M ∙ U in dimensions) of all we can get hold of in return for getting rid of the money (U ∙ m) in hands.              According to the general theory, we are in the right mind, as opposed to the left, all through the “run” from “short” to “long.” Few of us would as the lost opportunity name “the composite rate of interest” as in The General Theory ...

  Occasion #1 . At present, the mega-apple sells @$3.00 at Walmart and @$5.00 at Trader Joe’s. Where would you in the right mind make the purchase? Occasion #2 . The Cruiser Tom offers a trip to the Antarctica @$1,000 today and @1,030 a year hence. At your time value of money of 2% per annum , when would you make the once-in-lifetime trip? Occasion #3 . The mega-apple selling @$4.00 renders 4,000 calories and the supra-orange @$6.00 7,000 calories . Which would you as calorie mania buy?               I have the answer in my mind which usually stays right. Then, your choice is as rational as mine. As people move in droves, there will be only one price prevailing in the free market of voluntary choices, so to speak.   Interspatial arbitrage. At the same point (read: a short period) in time, prices tend to be equalized into one across space.   Intertemporal arbitrage. As for the same marg...