The Chimera of Macroeconomics

  The rest of us now arrive at Political Economy , which is more like an art than a science.                As we discuss earlier, there is only one motive of “ money hoarding ,” that is, in preparation for monetary transactions in the near future ; on the flipside, money is useless until we spend it (Irving Fisher from New Haven, 1930). [Auto-suggestion #1: “ Preferred liquidity ” is nowhere fluid or current; it always is in forms of solid legal tender or thin-airy deposits.] [Auto-suggestion #2: The future is uncertain to everybody except for certain macroeconomists in the “ money market .”]              With regard to transactions with money, William Baumol from Princeton devises the convenient formula in “The Transactions Demand for Cash: an Inventory Theoretic Approach” (1952): M d = ( b ∙ T / 2 i ) 1/2 , where b stands for financial transaction...

  We already know that the Phillips curve of tradeoff between the inflation rate (T -1 , or per period) and the unemployment ratio (T 0 , as at a certain moment) makes little sense. Other than the curve, we never plainly compare the driving speed to the driving distance: the two are different in the time dimension.                 Somehow, we have the Baumolite equation in hands: The wanted stock of money for expected transactions of all purposes M w = ( b ∙ T / 2 i ) 1/2 . (We avoid the denotation M d because “money demand” is a fatal misnomer.) Now, we do purposefully move from transactions in general to the nominal gross expenditures ( P ∙ Y ) in particular, together with the convenient assumption T= k ∙ (P ∙ Y) , where k is constant of course.                   Then we can derive this equation: g= 2m+ Δi/ i – π – Δ b ...

  According to a Korean maxim in Chinese characters, “The darkest is right under the lamppost” ( 燈下不明 ). Often times, the answer to an age-old trouble is of simple or rather naïve ideas around us for long, sometimes even longer than the trouble in hands.              Getting out of the popular framework of reference tangled with vested interests, we often find an incredibly short answer as in: 1)      “ Eppur si muove .” 2)      “The Emperor in naked!” 3)      The “equation of monetary inventory” by William Baumol (1952) is all that we might refer to at the very beginning of an economic downturn .   To “keep things simple,” we copy the following from somewhere else:              ( Quote ) The household has to conduct cost-benefit analysis for the decision how much money to hold ( M d ...

  Imagine we get incremental money ( Δ M ) from the “ helicopter drop ,” so to speak. What would take place soonest? 1)      The Fisherian way: We spend Δ M as soon as possible because “ Money is of no use until it is spent ” (1930, p.5). A silver lining nevertheless, the increment ( Δ M ) is never excrement. 2)      The Keynesian way: Our “preference” is to hoard the additional “ liquidity ” ( Δ M ) in small rectangular solid pieces of paper or “thin-airy” demand deposits for fear of the “ liquidity trap ” (1936). 3)      The Hicksian way: The real GDP momentarily shoots up as in M= k ∙ P ∙ Y (1937) with P “sticky” and k “constant.” 4)      The Baumolite way: There will be inflation through a double channel; one the increment of Fisherian money of no use ( Δ M ) and the other the “doubling up” of the velocity of spending ( ΔV ) (1952). 5)      The Mankiw style i...