Moving Up : Microscopes to Mirrors (Microeconomics to Macroeconomics)

1. 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.

2. 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 environmental, 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.

3. 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 environmental, 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

4. 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.

5. 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.