The Chimera of Macroeconomics

  All the celebrated ideas of indifference curves, isoquants and production possibility frontiers are associated directly or indirectly with a “ budget constraint .” The budget may in terms of a good, money or two production factors.              Interestingly, however, the budget constraint is of no use either in the market or in the economy. More specifically, the constraint is irrelevant to the market while redundant, or “nominal” as used in macroeconomics, in the economy.   No Constraint to the Market. To begin, the market is imagined for a particular product traded in a bounded community over a defined period of accounting. Otherwise, we cannot think   of the equilibrium price ( p* ) and the quantity traded ( q* ), much less naming them.              By nature, the product is merely one of indefinitely many goods and services wanted by t...

  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...