The Chimera of Macroeconomics

    With “benevolence” out of question, the rest of us wear quite many economic hats in everyday life: 1)      Home or in private capacity                - Producer and consumer of goods and services                - Constructer of and investor in assets including human credentials                - Owner and renter of physical and human assets 2)      At the firm in public capacity                 - The investor in and a partial owner of the firm                 - The renter of various assets, physical or human               ...

  John M. Keynes illustrates the “liquidity preference” function: M= L(r) (1936, p. 168). Next year, John R. Hicks in “interpretation of Mr. Keynes” comes up with the money demand “equation of Cambridge Quantity”: M= k ∙ P ∙ Y .              To be fair, they like us “demand” money to spend in the near future primarily because “Money is useless until we get rid of it” (Paul Samuelson and William Nordhaus, Economics , 2010, p.458); such getting rid of can never be “now or in the past.” On the other hand, both the interest rate and GDP are already given from outside (read: already determined ).              In mathematics jargon, the interest rate and GDP are a parameter as opposed to a variable. By definition, the parameter is exogenous, while the variable is supposed to be determined in, or “exogenous” of, the market. Wait, a mathematical parameter does not...