What other basic terms do we need? Cash flow at the collective scale, where transfers cancel internally, and there is no source of investment from outside, simplifies to exhaust of value in taste satisfaction. There is no negative component because there is no external source of new investment. Tradition through most of economic history has called this exhaust consumption. Schultz recognized some consumption as investment in human capital, I said earlier, and limited the exhaust to “pure consumption”. I will use this and the term “exhaust” interchangeably. Then transfer, consumption, exhaust and pure consumption belong in the vocabulary too.
at
So does “invested consumption”, my restatement of Schultz’ “pure investment” in
human capital.
This seems to be the right track. The object is prediction of behavior. The maximand rule predicts all behavior, and I have sought to build a vocabulary and catechism to clarify its terms. The right vocabulary, thank gosh, is mostly the one we have all used since Adam Smith or even Petty. It has needed only a little tweaking and
clarification, as to the two kinds of capital and consumption for example.
There is a “fundamental theorem” of calculus showing how differentials and integrals fit together. Its proof takes a lot of thought. There is a simpler one for algebra. Might a fundamental theorem of economics be helpful? Obvious candidates would include the maximand rule predicting all behavior, the total return truism explaining the output numerator of the maximand (rate of return), and the present value rule explaining the capital denominator. For years I chose the maximand rule as the fundamental theorem. Then | preferred the present value rule as more fundamental since it explained the denominator. But so would be the total return truism in explaining the numerator. Now | opt for the judgment of Paris. Let the three together be the fundamental theorems of economics. The maximand rule is the centerpiece, and the other two define its terms. All three together are much
easier to follow, mercifully, then the one of calculus.
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