The Chimera of Macroeconomics

  <Questions for Review of “Money Demand”> 1.      What was “money” historically? - Commodities: shells, stones, copper, nickel, silver, gold and so on - Classical economists: a veil - David Hume among others 3) : the annual average 2) of monetary outstanding               - John M. Keynes among others: the outstanding balance as at a moment of interest - John R. Hicks among others 4) : something that is a “constant” fraction (or multiple) of                                                                          the annual “nominal” income: i.e. M= k ∙ I = k ∙ ( P∙Y ) 2.      How do we calculate the average?             <A> There ar...

  <Problems and Applications>          *Note: “T” for time period, “L” for length, “M” for mass and “U” for value of utility                          There are indefinitely many scales per T, L, L 2 , L 3 , M or U.                  1.      The time taken in the 100m dash: T= L/ (L ∙ T -1 ) - El Condor: 8 milli-sec = 100m/ (12.5m/ milli-sec) - The winner: 8 sec = 100m/ (12.5m/ sec) - The laggard: 8 min= 100m/ 12.5m/ min) - The Snail: 8 hours= 100m (12.5m/ hour) *Notwithstanding the Solow model, n o “marathoner” has ever won in a public event of 100m dash .      2.      The travel distance of the sunlight: L= T ∙ (L ∙ T -1 ) - In two seconds: 600,000 km= 2 sec ∙ (300,000 km/ ...

  Differently from algebra in general, dimension algebra is mostly of multiplication and division; the latter for the purpose of performance accounting. Additions when applicable do not add up, which is not much meaningful anyway.   Dimension Denotation In physical sciences: “T” for time period, “L” for length in space and “M” for mass Additionally in economy: “U” for value of utility ① Homogeneity “T” and “L” homogeneous; “M” heterogeneous “U” heterogeneous in private, yet homogenous in public             T+ T= T             Line: L+ L= L . area: L 2 + L 2 = L 2 , volume: L 3 + L 3 = L 3             M: un-addible but in legal tender; U∙m + U∙m = U∙m   Dimensions of Key Terms             Utility, benefit, cost, worth and price: M...

  There are two factions of Three R’s , conservative and progressive: the former are Reading, Writing and Arithmetic; the latter Recycle, Reuse and Reduce. We call as Algebra the plain or plane (L 2 ) extension of Arithmetic of the former .    .                 In measurement of performance to be accounted for, we need before anything else a clearly defined metric of dimensions and scales. Virtually no one, a macroeconomist or otherwise, has difficulty recognizing such different scales, for instance, of length (L in dimension): millimeter, meter, inch, yard, mile, and all the way to light-year . Unfortunately, we except for physical scientists have difficulty figuring out the dimensions and as a result conveniently choose to neglect them.             Traditionally, we have three dimensions, viz., space, time (T for time duration) and mass (“M”...

  “People Respond to Incentives,” or does the Harvard prof. Gregory Mankiw suggest as Principle 4 of Economics. In the market economy as well as in economics, the incentive is offered after accounting for the performance over a certain period. The baseline: As to “Rational People Thinking at the Margin” ( ditto 3), the marginal benefit in a particular period is the incentive and the time spent for the performance is the marginal cost .              In the public place including the market, public accounting in modern times is always in terms of the sovereign currency unit. Or, the currency unit is the metric of accounting, or “the unit of account.” For simplicity, we name the dollar sign ($) as the unit.   The Incentive. Generally speaking, incentives are offered in terms of the particular piece of paper, often called a “bill,” with the face of George Washington in the front. Practically, the vast majority of ...

  A moment is to a period what a dot is to a line. There is no dimension in the moment and in the dot, while one time dimension (T 1 ) in the period and one length dimension (L 1 ) in the line. As the naught (0) does not exist on Earth neither does the moment or the dot; all the three are imaginary and mathematical.               Theories are approximations, as Eugene Fama at Chicago Booth once quipped. Let us take the survey period (T -1 ) for the approximate moment (T 0 ). Now, we somehow have the stock (T 0 ) of a certain measure, for instance, the volume of water in the tank.             The tank is empty in the beginning. Then the flow comes in at a certain speed, say, F litters per hour . We have 1 ∙ F liter of stock in an hour, 2 ∙ M in 2 hours and n ∙F in n hours. The three R’s tell us that the flow stacks up at the incoming speed of F over n hours...

  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...