The 0th Law of Microeconomics and Macroeconomics





The 0th Law of Macroeconomics and Microeconomics is as follows :

Any Microeconomic or Macroeconomic theory, principal or conjecture is explicitly forbidden from ignoring the principals and practices of accounting.

Any separation of "accounting practice" from "economic theory" will completely and totally void the economic theory, as any and all economic theory 'is based on the observation of the average and typical behaviours of masses of individual accounting decisions'.

All Microeconomic or Macroeconomic theories, principals or conjectures can only follow after the 0th Law.

Microeconomic or Macroeconomic theories, principals or conjectures can only follow after the 0th Law.






The fundamental arguments that makes the 0th Law true
  1. All thermodynamic systems, in order to be compared to each other [or to otherwise function properly] must do so within the reference frame of Absolute Temperature.
  2. Although finance systems have many thermodynamic behaviours, finance systems are by nature not thermodynamic systems in any way shape form or manner.
  3. All finance systems are bound by bookkeeping rules for Debt and Equity, the fundamental units and reference points of finance systems.
  4. Personal and Household Debt (as well as Equity) are the fundamental units by which all economic theories, systems and ideas must characterize or pay attention to.
  5. Household bookkeeping problems and success make or ruin economies and companies or their governmental equivalents.
  6. All finance systems scale to greater levels of complexity (personal accounts, household account, firm, city, province, nation state) but are all uniformly bound by the inherent economic properties of Debt and Equity at its lowest functioning level in an economic system.
  7. Debt and Absolute Prices deeply matter in all economic systems, and both originate from accounting systems.



Implications of the 0th Law
  1. All Debt at any and all points must be fully accounted for (including Interest related to Debt).
  2. Absolute Prices at any and all points in an economic system must be accounted for.
  3. The properties of Relative Prices in an economic system can be ignored as Absolute Prices principally dictate economic system behaviour -- Relative Prices are only an effect of Absolute Prices.
  4. Historical precedents that have accounting and economic system implications must not be ignored.
  5. The impacts of foreign exchange and trade patterns that affect Debt and Prices existent in an economy or system of economic theory must be considered beyond the standard accounting window of 7 years.
  6. Observational windows of 21 years (3 accounting cycles) for Microeconomics to 70 years (10 cycles) for Macroeconomics should be the temporal windows for all intellectual consideration and computation.
  7. General Unemployment and long term Structural Unemployment must be fully accounted for as it affects Debt and Prices.
  8. Conceptual economic systems must exist in the Debt and Equity domains, as accounting systems function perfectly without any Debt.
  9. Any economic system that functions only in the debt domain cannot be valid.





Initial concept based on


The Steve Keen's ABC Radio (abc.net.au) lecture on the program "Big Ideas" transmitted (29 March 2009).





Historical scientific precedents for this nomenclature




References




People whose theories and ideas don't go against the 0th law


  • Hyman Minsky (responsible for "Financial Instability Hypothesis")
  • Irving Fisher (unclear to me how at this point, but ideologically he seems not to be opposed)
  • Steve Keen (the intellectual originator of a great deal of the language and ideas behind the 0th Law, but he never made the final leap of logic to the law itself)


Cultural odds and sods somehow related





Author
Initial Idea
Created
Last revised

Max Power
12 February 2009
09 September 2009
30 March 2013 (cleaned up appearnce and tables)