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Non-self-averaging and the statistical mechanics of endogenous macroeconomic fluctuations

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  • Aoki, Masanao
  • Hawkins, Raymond J.
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    Abstract

    Strong fluctuation phenomena are an endogenous feature of economic systems if they are non-self-averaging. We show that an important consequence of non-self-averaging is that current forms of economic policy can be rendered useless. We also find non-self-averaging both to exist in microeconomic models of cluster development within economies and to be consistent with observed economic power laws. These results suggest the need for straightforward identification of non-self-averaging in economic systems and to this end we present a sufficient condition for non-self-averaging in terms familiar to financial risk management.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 27 (2010)
    Issue (Month): 6 (November)
    Pages: 1543-1546

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    Handle: RePEc:eee:ecmode:v:27:y:2010:i:6:p:1543-1546

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Macoeconomic models Dynamics Non-self-averaging;

    References

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    1. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
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    3. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
    4. Ikeda, Yuichi & Fujiwara, Yoshi & Aoyama, Hideaki & Iyetomi, Hiroshi & Souma, Wataru, 2009. "Superstatistics of Labour Productivity in Manufacturing and Nonmanufacturing Sectors," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(22), pages 1-17.
    5. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
    6. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    7. Schohl, Frank, 1999. "The Paradoxical Fate of the Representative Firm," Journal of the History of Economic Thought, Cambridge University Press, vol. 21(01), pages 65-80, March.
    8. James E. Hartley, 1996. "Retrospectives: The Origins of the Representative Agent," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 169-177, Spring.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    10. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    11. E. Samanidou & E. Zschischang & D. Stauffer & T. Lux, 2007. "Agent-based Models of Financial Markets," Papers physics/0701140, arXiv.org.
    12. G. Yaari & S. Solomon, 2010. "Cooperation evolution in random multiplicative environments," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 73(4), pages 625-632, February.
    13. Hawkins, Raymond J. & Aoki, Masanao & Roy Frieden, B., 2010. "Asymmetric information and macroeconomic dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(17), pages 3565-3571.
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    Citations

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    Cited by:
    1. Masanao Aoki & Hiroshi Yoshikawa, 2012. "Non-self-averaging in macroeconomic models: a criticism of modern micro-founded macroeconomics," Journal of Economic Interaction and Coordination, Springer, vol. 7(1), pages 1-22, May.
    2. Sorin Solomon & Natasa Golo, 2014. "Microeconomic Structure determines Macroeconomic Dynamics. Aoki defeats the Representative Agent," Papers 1401.7496, arXiv.org.

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