Re: The economic whole equals the sum of its parts.

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

The 'fallacy composition' argument can even be applied to Keynesian
macroeconomics -- It is a 'fallacy' to assume aggregate saving is simply
sum of individual decisions to not spend.

Harry Veeder

> From: John Vertegaal <vertegaa@xxxxxxxxx>
> Date: Sat, 6 Apr 2002 19:45:37 -0800 (PST)
> To: POST KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
> Subject: The economic whole equals the sum of its parts.
>
>
> 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
>
>