The economic whole equals the sum of its parts.

[John Vertegaal <vertegaa@xxxxxxxxx>]

In the thread: "City of Beijing announces Job Gaurantee"
John O'Donnell wrote:

>>It is "representative firm modeling" in that the
>>demonstration is the effect of macro economic policy on the
>>behavior of micro economic decisions. The only extent to
>>which the model is brought forward to represent the economy
>>as a whole is the simple fact that the total is the sum of
>>its parts.

>>Can you provide some specifics of the pitfalls you see? The
>>fallacy of composition you seem to be asserting is one of
>>improperly imputing the whole will have the same composition
>>as a partial sample of the parts. I make no such assertion.

and

>None of my argument depend on imputing characteristics of a
>part to the whole beyond simply concluding that the whole is
>the sum of its parts and even that conclusion, while
>obviously true, is superfluous to my argument.


The macro economy is not as simple as you make it out to be.
It is a dynamic circular flow system that moreover is complex,
because of overlapping horizontally flowing components (profits).
And at no time can it be represented by a single equation as the
sum of its parts, because complexity results in the values of all
those parts not being determinate at the same time.
If you try to build a system integrally, from what are essentially
"elastic" components, then the outcome is either meaningless or
contradictory EVERY TIME.

You presuppose microeconomic values before they are systematically
ascertained, and your model asserts that by manipulating micro
supply-side components, macroeconomic demand can be determined.  As
a deduced conclusion this is fallacious, because there is no way to
independently determine the value of microeconomic components in
terms of the systematic outcome.  The values of the system's micro
elements, as depicted from elementary axioms governing the system
as a whole, are determined by demand only.

Hence, it is not pricing, but satiation and the fallacy of being
able to postpone direct spending indefinitely, that determines
economic (ill-)health.  And the assertion that the system equals
the sum of its parts is meaningless, because at any particular time
those parts cannot be measured.

John V