The Chimera of Macroeconomics

  Mr. Robinson is the economy all by himself in Crusoe Island. As a result, life is at the same time home and in the macro-economy. Economics. He has no opportunity whatsoever to engage in trade which needs two sides, the credit and the debit. Consequentially, “the market” is down with “trade after specialization.” Nevertheless, he is rational enough always and everywhere to mind efficiency, or “economy” if we will.             On one hand, the time (read: the period, never the point) is his currency. On the other hand in Island, there is no alternative in accounting for efficiency to measuring his utility acquired per hora (M ∙ U ∙ T -1 in dimensions). In the economy or as for individual economy:             Principle 1 . Time and space are limited .             Principle 2 . Nothing utile comes for free. ...

  The rest of us would not deny that there is no substantive difference between Crusoe’s life in Island and our life in Here. See, we told you so: Time is currency!             To begin, let us get some names correct. Efficiency: doing something, good or bad, at the lowest cost possible. Productivity: the output in physical, or “real” in macroeconomics, quantity per input of labor-hour. Effectiveness: doing the right thing. Righteousness: conduciveness to obtaining the end of supposition. The end of production: consumption (to Adam Smith). Division of labor at the factory: the more efficient way of production ( ditto ). The end of trade after industrial division of labor: a better alternative to proprietary productions (to David Ricardo).               Economy: ① efficiency in conjunction with consuming utilities as wanted, or needed and desired; ② (the -) the hi...

  Suppose Robinson Crusoe’s life on the Island.             As usual, he on arrival comes across good news and bad news. The bad news is that he finds himself empty-handed: he owns no physical capital. The good news is that he is all by himself and that he owns bountiful human and natural capital.                  Ironical but true, he is enormously wealthy but extremely poor: the former is a matter of assets (T 0 ), while the later productivity (T -1 ). A lesson: Consumption is not a function of wealth, contrary to the general practice in macroeconomics. To be mathematically correct, before consumption we have to differentiate the wealth variable with the time variable. After all, production to consumption (T -1 ) is to Economics what wealth is to Finance (T 0 ). Don't mix 'em.              L...

  Here on Earth. For each and every one of us, the time (duration) in Here is limited to 125 years at the longest. As a natural consequence, the time is the most fundamental currency of us who are no macroeconomist. To paraphrase, anything valuable is the “output” of time spent, currently (“product”) or in the past (“asset”), in its creation (T -1 ) by some of us.              The market trade is nothing but an exchange of the thing (“M” for mass in dimension denotation) between values (U for utility value in dimension) as appreciated by the two parties. The product in the form of a good or a service must have some value (M ∙ U). The invisible hand would not let a value-free product in the market. There is no place for the so-called “real quantities,” after all.              For the sake of convenience in trade across the commonwealth (L -2 L for length)...

Most troubles with Cambridge macroeconomics stem from fatal misunderstanding of the market framework. Just one of so many tragic instances is the comedy-like narrative, “In the money market, the demand for money slopes downward because the interest rate is the opportunity cost of holding money.” Those macroeconomists get each and every term of the single sentence wrong.              For the purpose of “getting the market correct,” we navigate through as follows:   1)               Setting the boundary 2)               The demand curve 3)               The supply curve 4)               The opportunity cost 5)     ...