The Chimera of Macroeconomics

  There are one commonality and numerous differences between the two gentlemen of fame. Differences first: 1)      American vs. British 2)      In the 19 th vs. in the 20 th century 3)      Salesman all across the nation vs. Economist at Cambridge 4)      …… 5)      …… 6)      …… 7)      So on 8)      So forth Only commonality next:              ***Snake oil vendor (by profession or otherwise, wittingly or not)   Don’t get us wrong: J.R. Hicks’ “equation of Cambridge Quantity” is nothing but ineffective amalgam of Finance (about ownership of financial assets at a moment in time, T 0 ) and Economic activities ( per annum , T -1 ). In Economics jargon, the former is a “stock” and the latter a “flow.” The two of them can be associated, ...

Naming a numeric multiplier of the unity (1) with two more digits after decimal point, Christina Romer once spoke high of fiscal policy. Then on, Robert Barro did not like her claim among other reasons for “being imprecise by being too precise.” After all, a quotation of number smaller than the “margin of error” is statistically incorrect .              Whoever is more right, “fiscal multiplier” is more like snake oil, misconceived and stillborn.              First, one of many parents of the misconceived is from cross-sectional data (L -1 ) at a given point in time (T 0 as of the month of survey). Exponents and supporters of “multiplier” neglect the simplest fact that the “marginal propensity to consume” is no more applicable to over-time stability (T -1 ) than the balance sheet is combinable to the income statement.         ...