The Chimera of Macroeconomics

  When “A Time Runs through It,” it become another “River of No Return.” Once gone, forever gone, if in economics. However, owing to Paul Samuelson , arguably the first author of a textbook on macroeconomics , we are alarmed ( Economics 1948, p.9): What is true for economics of each market may not be true for macroeconomics of all the markets.              In macroeconomics, the time is supposed to stick around over an undefined period, particularly in the IS-LM and AS-AD models. Again in science, undefined, indefinite, irrelevant and inexistent are siblings (T 0 ). In short, “time is useless until we get” exogenous to Cambridge ( borrowed from Samuelson and Nordhaus, Economics , 2010, p.458).   Fallacy of composition . Yes, we in economics freely choose to work for utile quantities over the run, short or long, of time (U∙M∙T -1 ). If in the market, exchanges are voluntary all across but for virtually random...

  Let us recall the IS-LM model , which a certain famous-yet-infamous Nobelist calls “a model of several interacting markets, which will make a lot of sense.” Depending upon what he means with “making a lot of sense,” the model would be right or wrong. Here, we do not mean true or false, because the model can by no means be true: Very much surreal is the presumption therein that the price level ( P ) remains indefinitely “constant”.                 Incidentally, “right or wrong” is to an opinion what “true or false” is to a theory. And, the time period is un-defined (T 0 ) in association with GDP ( Y ) on the abscissa or the interest rate ( i , r , both, either or neither) on the ordinate of IS-LM. Rule of Thumb . I bring an umbrella when it feels like rain. If the central bank pump-primes money, GDP is likely to stabilize. Voila, the time is irrelevant (T 0 )! Conventional Wisdom . The sun rises in the ...