The Problem of Macroeconomics

the problem of macroeconomics:

the base assumption of macroeconomics is rather that people behave economically in more or less the same manner or that the majority in what they do sway the economy such that we may frame theory so as to be workable. so to arrive at a model that explains what happens when variables under guidance are manipulated is to identify general economic patterns and to construct a framework for the economist to understand the open economy.

interest rates, money, marketable assets, property, these concern everyone in the open economy. theory on interest rates seemed applicable, but globalization and opportunity have spread and thus complexity has arisen and, because there are so many more choices now, it is hard to determine how and why the individual reacts to any change in any variable. the economist is left to speculate how interest rate moves in say, the Base Rate or Prime Rate, affect other interest rates.

may that be that credit card interest rates are beyond such interest rate moves by the government and thus so indicate they be purely in the domain of private banks who face the consumer? only recently has the market changed. the government aims to control inflation, also to boost economic output. given that output figures depend on the sum of money spent, it is one solution to increase the rate at which money is spent, that is, to increase the velocity of money.

herein lies the difficulty. i think to say that with more money you spend more is a general truth. but with less money, do you necessarily spend less? not everyone has the same ideas about money is the total problem. everyone has a unique spending history.

also the total problem with inflation is that it is always about inadequate supply of what is most demanded.

to add complexity to the argument, pro economists might like to arrive at different models for different types of economic agents. how many types are there? the spendthrift, the frugal, the vain?

CLEARCHARGE