The Chimera of Macroeconomics

  The rest of us find on the shoulders of Irving Fisher from New Haven and William Baumol from Princeton as follows: 1)      Money is useless for any other purposes than “purchasing.” We hoard it, if ever, in solid cash or thin-airy demand deposits to utilize as the liquid currency, aka GAME (for generally accepted medium of exchange), at the time of exchange . 2)      Like any other “ People Thinking at the Margin ” (to Gregory Mankiw from Cambridge ), the rest of us think at the margin and keep amassing money to the marginal dollar where the benefit of hording equals to the cost .   3)      Typically in Princeton, the collective sum total of individual liquidity preferences in preparation collectively for P ∙ Y (“ nominal GDP ”) is found out to be to be: M d = ( b ∙ P ∙ Y / 2 i ) 1/2 . 4)      Owing to Paul Samuelson from Cambridge, the rest of us are very much well aware that...

  We already know that the Phillips curve of tradeoff between the inflation rate (T -1 , or per period) and the unemployment ratio (T 0 , as at a certain moment) makes little sense. Other than the curve, we never plainly compare the driving speed to the driving distance: the two are different in the time dimension.                 Somehow, we have the Baumolite equation in hands: The wanted stock of money for expected transactions of all purposes M w = ( b ∙ T / 2 i ) 1/2 . (We avoid the denotation M d because “money demand” is a fatal misnomer.) Now, we do purposefully move from transactions in general to the nominal gross expenditures ( P ∙ Y ) in particular, together with the convenient assumption T= k ∙ (P ∙ Y) , where k is constant of course.                   Then we can derive this equation: g= 2m+ Δi/ i – π – Δ b ...

  For the sake of convenience, we copy the following from somewhere else:   The Phillips curve relates the inflation rate ( π ) to the unemployment “rate” ( u ). Basically, there is dimension aberration: the inflation rate has the time dimension (T -1 , or per peiod) while the unemployment rate, a ratio as a matter of fact, does not (T 0 , or at a moment). In order to link the two, we need a “coefficient” with the time dimension, but finding one may not be easy. To tell the truth, a rate (T -1 ) can if ever be bridged to a ratio (T 0 ) with a third variable (T 1 ) rather than a constant coefficient.     The same holds true for any type of level as well. For example, a price level at t 1 ( P t1 ) may be connected to another at t 2 ( P t2 ) with the inflation rate per certain period ( π ) times a multiple or a fraction ( n ) of the period; that is, P t2 = P t1 ∙ (1+ n ∙π) , where n is a variable in the time dimension (T 1 ).       ...