Economics contributes a kind of great knowledge by processing economic issues via economic analytics. Around the idea that the market is the engine of economy, the wealth expansion theory contributes a pure economics that both knowledge and capital promote wealth expansion and economic growth. Via a grand synthetic model, it is revealed that marginal effects act in both input and output sides; that tax, interest, and exchange rates become key ratios; that a big parameter b links the logarithmic Cobb-Douglas model and the per-capita Solow-Swan model; and that the microeconomic Arrow-Debreu model and the macroeconomic Mundell-Fleming model are combined as an economic standard model.
TopNational Rich Out Of Individual Rich: Economic Policy Implication
A country is made up of its citizens, i.e. a nation is composed of individuals. A country is prosperous if, and only if, its citizens are rich, which is the same as saying national rich out of individual rich. Therefore, the object of economics aims to maximize national welfare and citizen wealth. Thus, on the economic policies, some considerations should be clarified:
- 1.
On tax rate and taxation: it is suggested to set a low tax rate to keep the wealth of the citizens. It is also needed to reinforce that single levy rule, which means that any taxation should happen one-time during an economic cycle. For example, production tax and product tax are the same, and can only be charged once. Also, income tax and consumption tax happened in the same economic ring, consumers can only be asked to pay either income tax or consumption tax, not both. Lower taxation might also reduce government corruption.
- 2.
On the interest rate and product profit: it is suggested to keep at a reasonable level. Higher interest rate and lower product profit might cause consumption and industrial investment to shrink, while lower interest rate and higher product profit could stimulate consumption and production. The zero or negative interest rate or product profit would stop economic development. Therefore, the modification of interest rate is key to all economic policies.
- 3.
On the exchange rate and international trade: it is suggested to keep a flexible exchange rate and international trade. The exchange rate can also be a policy tool for economic adjustment, which may be applied as an economic policy. However, the policy tool may be ineffective for small countries, because there is not enough domestic markets for their national economies to maneuver.
Synthetically, tax, interest and exchange rates represent the considerations of political economics, which also affect inflation rate and unemployment rate. We may pay more attention to the three rates.
As economic equilibriums exist in both microeconomics and macroeconomics, economists make great efforts to realize optimization of economic efficiency and social equity, which introduce lots of great thoughts to the modern world, where we see that economic ideas stimulate knowledge progress and technology promotes wealth expansion.
TopWhile knowledge is really promoting wealth expansion via a technical parameter q > 1, capital also promotes imaginary wealth expansion with inflation rate λ, and then we get a synthetic output increment
∆
Y = K𝜆Hq(1–𝜆); Δ
y = 𝜆
k+q(1–𝜆)
h(1)So we know that the real-imaginary ratio of wealth expansion isR = Hq(1–𝜆)/K𝜆; r = q(1–𝜆)h/𝜆k(2) R > 1 or r > 1 means that real wealth expansion is larger than imaginary wealth expansion, while the R < 1 or r < 1 reveals that the virtual wealth expansion is larger than the real wealth expansion. The R = 1 or r = 1 indicates a stable state at the equilibrium of real and imaginary wealth expansion. While the q(1−λ)h indicates the real part of wealth expansion and λk denotes the imaginary part of wealth expansion, it is expected that q(1−λ)h > λk, so that the real wealth expansion dominates the economy. Otherwise, the wealth expansion is only a virtual image.
Therefore, both knowledge and capital promote wealth real expansion, and one can adjust wealth distribution with optimization via economic policies. A healthy economy should maintain R > 1 or r > 1.