The Chimera of Macroeconomics

  Opening a text book on Principles of Economics, one of the first things we come across is “Supply.” Fact one, the supply is at the marginal cost of production. Fact two, the value of cost is accounted for in the sovereign currency unit .              Fact three, the supply schedule of the product exists with no regard to the Demand and a price. The price would be the opportunity “benefit” per unit in compensation for all the money and time spent for the supply. It’s more or less “weird” that no economist has ever referred to opportunity benefit , the mirror image of opportunity “cost.” Again, the article “the” means the single highest value of all opportunities forgone.              Such a narrative as the opportunity cost of “liquidity preference” is the interest rate is fatally misleading. To most everyone other than a macroeconomist, the opportunity ...

  Implicit or explicit, macroeconomists conceive that the so-called “liquidity preference” (L≡ M d ) and “money supply” (M≡ M s ) comprise “the money market . ” This market is often opposed to the “product market” of the real investment ( I ) and the real saving ( S ). As well known to students, the two of L and M join forces to produce the LM curve. Umm, the one out of the IS-LM model!             Unfortunately, there cannot be anything like the LM curve. First, the time (duration), more than critical to the rest of us in Here on earth, is completely missing in the curve. Second, all the relevant terms, demand, supply, “liquidity preference” and the like are misnomers .             As expected the LM curve is misconceived and stillborn so as to be firmly fixated in a textbook.    Reality #1. John M. Keynes illustrates the “liquidity preference” function: M= L(r) (1936, p. 168)...