The Chimera of Macroeconomics

  What are the differences among mathematics, a scenario and the reality? Difference #1. The three are respectively imaginary, virtual and real. Difference #2. We can have anything we want in the first, a plan B in the second, but the Case as is in the third. There can in reality be Case B no more probably than Cleopatra's Nose was shorter.   Difference #3 . The timing and duration are irrelevant in the first, up to the writer in the second, and “everything” in the third.   What is a “parameter”? Oh, that’s a great question. 1)      Mathematics : Such as the z in the following equations. x= f(z) ; y = g(z) → y= h(x) Not to mention, the two variables and one parameter are continuous and freely “variable.” There is no such thing as ex ante vs. ex ante : everything’s simul or simultaneous.   2)      Scenario : The writers can as she pleases have Plan A, Plan B, Plan C, and the like Plans are mutually excl...

  John M. Keynes illustrates the “liquidity preference” function: M= L(r) (1936, p. 168). Next year, John R. Hicks in “interpretation of Mr. Keynes” comes up with the money demand “equation of Cambridge Quantity”: M= k ∙ P ∙ Y .              To be fair, they like us “demand” money to spend in the near future primarily because “Money is useless until we get rid of it” (Paul Samuelson and William Nordhaus, Economics , 2010, p.458); such getting rid of can never be “now or in the past.” On the other hand, both the interest rate and GDP are already given from outside (read: already determined ).              In mathematics jargon, the interest rate and GDP are a parameter as opposed to a variable. By definition, the parameter is exogenous, while the variable is supposed to be determined in, or “exogenous” of, the market. Wait, a mathematical parameter does not...