The Chimera of Macroeconomics

  The term “ arbitrage ” is popular in finance largely in the meaning of taking a risk-free benefit from two different prices of a utile object. Somehow in economics, the term is almost unheard of. Instead, people are said to go for it, when a marginal benefit (MB) outweighs the marginal cost (MC); where, the MC means “foregoing the next best of all.”              We, the nameless, are particularly serious about the last point. For instance, the MC of “ liquidity preference ” is: the most desperate real want (M ∙ U in dimensions) of all we can get hold of in return for getting rid of the money (U ∙ m) in hands.              According to the general theory, we are in the right mind, as opposed to the left, all through the “run” from “short” to “long.” Few of us would as the lost opportunity name “the composite rate of interest” as in The General Theory ...

On the basis of discussions on the asset, we make some sorting-outs: 1)      Kinds of asset - Human - Physical: machine and land (to site or soil) 2)      Kinds of power. - Human power - Mechanical power → “Machine power” - Brain power - Soil power 3)      The purpose of rental (unit of rental) -Occupation: Site (site-hour) -Creation: Power (person-hour, machine-hour, acre-hour) → The creation function q= f(p-h, m-h, a-h)   Problems of transaction costs . We have to pay transaction costs of various kinds while we stay in Here, as opposed in a Dream, a Preference, Eternity or Cambridge: 1)      Commercial transaction costs, while “value being added” of trade - Hitting the triple coincidences , among other (private) costs: . In kind: I have to offer what you would bid. . In degree: I have to bring a fifth of Bovine for your Swine in life. . In site: I have to br...

  This is about the asset market of the title , as opposed to the rental right. We are herein interested in the secondary asset market. From the demanders’ perspective, at any rate, the supply being primary (" I " for gross domestic investment ) or secondary (wealth of the nation, W ) is trivial. Instead, it’s the rate of return that matters.               For simplicity, we zero in on the individual asset, with the issue of “portfolio management” on hold. This would be a mirror image that we when in the product market rule out indefinitely many kinds of “substitutes.”               Bluntly  saying, the asset market is in, of and for the asset  under consideration at the moment. Needless to say, over the long year, neither the national wealth ( W ) nor the units of asset on the block is “fixed.” The only "fixed" is variation.  The...

  We measure the “ rate of return ” from an asset, with the annualized rental income per the market price . At the time of investment, the price is certain while the future incomes are not: they are “expected” at best; some are more certain the others, but nothing is completely free of uncertainties. Bluntly saying, investment is speculative ; to be honest, it’s sheer gambling .                On the flipside, a conventional wisdom tells us “not to put all the eggs in one basket.” In a similar vein, we are to and do make the so-called “all-in bet,” if at all, once in a lifetime. Most of us wouldn’t dare to cross another River of Rubicon for fear of becoming a traveler on the River. Watch your steps!   Sports betting. Suppose any of us is soon to bet a big money at a ball game neck-and-neck between the home team and the away team. Which team should and would she pick as the (expected) winner? Of course it d...

  For the purpose of illustration, we herein calculate some rates of return. Particularly in conjunction with financial instruments, the term “ interest rate ” is used in place of “ rate of return .” In either name, the current price and the (expected) rate are inversely related, ceteris paribus .   My house on the hill. Suppose my house in the rental market. I rationally believe that the residential service is valuable at $100 per annum “in real” “in the long run.” On the other hand, I set the value of time as 2% PA. Again, the value of time is as real as the time is. This is as opposed to that the “ time value of money ” in finance is "nominal." Question 1 : What price would I sell the house outright in the asset market at? The answer of rationality is “the PV ” (for present value) of the cash inflows in the undefined run of future. Unfortunately or rather fortunately, PV is not as straightforward to calculate as it appears to: there is the “ risk factor ” particul...

  In the asset market, the investor sits on the demand side. Seated on the supply are the two kinds: the liquidator , or “ dis-investor ” as we herein call, and the “ constructor ” of a fresh unit asset (to “ I ” in macroeconomics); the former is in the secondary channel while the latter the primary channel.             In various regards, the matter of “liquid” is elusive to catch always and everywhere, while the term “liquidity” is illusive in macroeconomics. First of all, “liquidity preference” is an oxymoron at best; in addition “liquidation” is a misleading name for a channel of “supply of funds” second to the primary of “saving” (“ S ” in macroeconomics) “Liquidity” in and out of Cambridge . Have you ever grasped the water , the most ubiquitous and most unanimous liquidity of all? At any rate, we prefer the liquidity of water only second to the general air (as opposed to the particular “thin air” around the bankin...