The Chimera of Macroeconomics

  According to Paul Krugman , among other Nobel Laurates, the IS-LM is “a model of several interacting markets.” As he updates, “IS-LM stands for investment-savings, liquidity-money — which will make a lot of sense if you keep reading.” (“IS-LMentary.” NYT blogpost , 2011)   Going for Details . With the above said, we quote among other Cambridge macroeconomists from N. Gregory Mankiw ( Macroeconomics , 8 th edition). I nvestment ( I ) as Demand for Loans. The quantity of investment goods demanded depends on the interest rate , which measures the cost of the funds used to finance investment. … The firm makes the same investment decision even if it does not have to borrow… but rather uses its own funds. … It slopes downward, because as the interest rate rises, the quantity of investment demanded falls. (pp. 63-4) Savings ( S ) as Supply of Loans . [This] equation shows that national saving depends on Y [as fixed by the factors of production] and the fiscal-polic...

  Nothing good comes for free. In other words, we have to pay a price for anything desirable. That’s the Principle No. 1 of the Harvard economist Gregory Mankiw in his super-selling Principles of Economics : “People face trade-offs.”              By the way, did you know that the book of economic principles has a 50-year Millite cycle? The cycle starts with J.S. Mill, Principles of Political Economy , 1848, to Alfred Marshall, Principles of Economics , 1890 to Paul Samuelson, Economics , 1948 to Gregory Mankiw, 1998 to Author You, Understanding Economic Correctly , 2048.                Suppose a boy named Donald. He has a long list of girls in order of preference as candidate of soul mate, lifetime or otherwise, subject to monogamy from Constitution: Audrey, Elizabeth, Kate, Natalie, Ann, Ivo ñ a, Mila ñ a, Stormy, Jean and all the way down to l a ni ñ a...