Moving Up pt 1x

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28 Οκτ 2013 (πριν από 3 χρόνια και 11 μήνες)

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Moving Up : Microscopes to
Mirrors (Microeconomics to
Macroeconomics)

Microeconomics
deals with individuals decisions made at a specific
point in time by a specific economic agent in a specific time and place.
These decisions relate to
how much to produce
in order to
maximize
profit
and
how much to purchase

in order to
maximize utility
.

Macroeconomics

deals with groups of people making generalized
decisions at multiple points in time by any agent at any time in any
place within the economic perimeter established by the nation,
industry or situation. These decisions relate to
how much to produce

in
order to
maximize wealth
and
how much to purchase
in order to
maximize welfare
.

They are therefore
quite different
but also
quite the same
... So much
so that we can analyse each with basically the same tools and
confidence.

Moving Up is Not the Same as
Adding it all Up

In theory, adding up all the transactions in a an economy should equal the total wealth and
welfare generation within that economy :


BUT:


*Definitions can change from situation to situation and from time to time so that
spatial price
differences
(discrimination) and
dynamic price differences
(inflation) can disrupt this
aggregation.

*Intermediary products and services

can change during the lapse in comparison and
therefore may not be in synchronization with technology.

*Impacts of changes in tastes and preferences

are not counted in the transactions as they
occur but only emerge later on such as e
nvironmental, cultural, and political

issues that can
change the interpretation of the wealth impact of any particular activity.


This leads to
biases in aggregation

that may lead to
misinterpretations of wealth
and
subsequently welfare as well.


Moving Up is Not the Same as

Forcing Others into Line.

In theory if everyone were the same, motivated by the same attitudes and perceptions, then it
wouldn’t matter how many economic agents were involved , nor when they were involved,
because nothing would change and there would be no need for a macroeconomic perspective on
wealth and welfare because that would be the same as maximizing profits and maximizing utility.


BUT:


*
Expectations

can change from situation to situation and from time to time so that
spatial price
differences
(discrimination) and
dynamic price differences
(inflation) can disrupt this aggregation.

* Anticipation of outcomes
can change during the lapse in comparison and therefore may not be
in synchronization with technology.

* Associational perspectives of what is “fair” and “just”
are not counted in the transactions as
they occur but only emerge later on such as e
nvironmental, cultural, and political

issues that can
change the interpretation of the wealth impact of any particular activity.


This leads to
biases in conformity
that may lead to
misinterpretations of welfare
and
subsequently wealth as well

Moving Up Depends on the Level
You are Moving Towards

The larger scale perspectives of macroeconomics can be applied to
regions, multinational
corporations and nation states.


For a
regional economy
the
wealth management is determined externally
and
welfare
optimization is determined internally.

The Prairie Provinces are a unique economic region and
welfare optimization is characterized by carbohydrates (farming) and hydrocarbons(energy) BUT
the values of these primary industries is determined externally by the Government of Canada.


For a
multinational corporation wealth management is determined internally
and
welfare
optimization is determined externally
. Multinational banks (The Royal Bank in Asia and the Bank of
Commerce in the Caribbean) are profit oriented but are governed by the Government of Canada’s
banking rules.


For the

nation state both wealth management
and
welfare optimization
are determined
internally.
For Canada as a whole wealth management is determined by the value of the Canadian dollar in
terms of other countries and welfare optimization is determined by the political process. Both are
controlled within the nation state.

Moving Up Still Lets Us Use
Economics

We will use
supply and demand analysis
and
structural cost analysis
just like we
did in microeconomics to analyse transactions but we will focus on:



Income as a measure of wealth



Growth in Income as a measure of welfare.


And



Dynamic changes in terms of their effects on localized decisions
.