The Chimera of Macroeconomics

  We have a life. First, we have to subsist and reproduce. Second on, we have a dream for the future. We have to prepare for subsistence, fertility and the dream. Where there is an end there must be a means.              We in economics call such a means “the asset.”   The asset for the short run. We consume what we produce in the current period. Macroeconomists envision, rightly or wrongly, such a production function: Y= f(L, K, N) , where L for Labor force, K for physical Kapital and N for land with Natural resources .              In our terms herein, L is the human asset, while K and N collectively represent the physical asset. The human asset is us, which is unquestionable. The physical asset is what we own , or have the property right to. Later we come back to how we utilize our assets of the two kinds. In the meantime, there are largel...

  Again, where there is yin ( 陰 , yin ) there is yang ( 陽 , yang ). The invisible hand, the market and the economy always and everywhere have two hands. In the first place, “The purpose of production (+) is consumption (-)” (to Adam Smith). Where there is a giving hand (+) there is a receiving hand (-) and vice versa . Each and all of all the kinds of matters, except for “liquidity” in Cambridge, never die or fade away “into the thin air.”              Each and all entities, but for a nonentity (0) or an Eternity ( ∞ ), have two ends , or two hands if we will, one vs the other, south vs north, east vs west or the like. Surefire ( 明若觀火 ; 明若 观 火 , míng ruò guān huǒ ), the principle of mass conservation!   12) Effects of Sticky Wages . Sometimes in macroeconomics, the sticky wage is named as the culprit of the sticky price. True or false, good or bad, or right or wrong, where there is a wage payer there must be a ...

  “Give me a one-handed Economist. All my economists say 'on ONE hand...', then 'but on the other’” is said to have been said by the former US president Harry S. Truman . The complaint notwithstanding, each and all economists have by creation two hands.              Economists are supposed to work, individually and collectively, on the economy. As such, the real question is, “How many hands does the economy have?” Needless to say, the answer depends on whom we ask the question of. The Liquidity Preferrer . As the case may be, at a certain level of interest rate people “unanimously” prefer the liquidity to all the other assets, physical and financial. This must fair-ly and fairy-ly mean that the velocity of money ( V ) falls down to the earth, or “the absolute zero base” as sometimes called, and that positively out of blue: V= 0 , period.              First ...

For a starter, we quote from two geo-famed macroeconomists.              Paul Samuelson : “ … one single confusion or fallacy, called by logicians the ‘ fallacy of composition . What is true for each is not necessarily true for all; and conversely, what is true for all might be quite false for each individual” ( Economics , 1948 p.9)              Ben Bernanke : “Although deflation and the zero bound on nominal interest rates create a significant problem for those seeking to borrow, they impose an even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation.” (“Deflation: Making Sure ‘It’ Doesn't Happen Here,” a speech in 2002)              Alas, none other than Bernanke, a student of Samuelson, commits the fallacy of composition. He forgets that t...