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The Macrofoundations of Micro

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  • David C. Colander

    (Middlebury College)

Abstract

This paper argues that there are two contending visions of macroeconomics: the micro vision--in which macroeconomics results are just the combination of results of atomistic individuals, and the macro vision--in which the interaction of atomistic individuals leads to such complexity that the aggregate results cannot be rationally deduced from the analysis of individual atomistic individuals. Using a macro vision, the economy cannot be analyzed contextually taking into account the constraints imposed on individuals by the macro institutions necessary to coordinate individuals behavior sufficiently so that markets can work. This macro foundation to micro approach offers a serious challenge to New Classical economics that other approaches to Keynesian macro do not.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume19/V19N4P447_457.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 19 (1993)
Issue (Month): 4 (Fall)
Pages: 447-457

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Handle: RePEc:eej:eeconj:v:19:y:1993:i:4:p:447-457

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Keywords: Macroeconomics;

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References

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  1. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, American Economic Association, vol. 69(4), pages 493-513, September.
  2. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, Elsevier, vol. 40(1), pages 128-137, October.
  3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 103-124, April.
  4. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(2), pages 117-136, Spring.
  5. Sargent, Thomas J. & Wallace, Neil, 1976. "Rational expectations and the theory of economic policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 2(2), pages 169-183, April.
  6. Howitt, Peter, 1985. "Transaction Costs in the Theory of Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 88-100, March.
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Cited by:
  1. Dieter Bögenhold, 2013. "Social Network Analysis and the Sociology of Economics: Filling a Blind Spot with the Idea of Social Embeddedness," American Journal of Economics and Sociology, Wiley Blackwell, Wiley Blackwell, vol. 72(2), pages 293-318, 04.
  2. Elke Muchlinski, 2005. "The Lucas Critique and Keynes Response.Considering the History of Macroeconomics," Macroeconomics, EconWPA 0503019, EconWPA.
  3. Hammersland, Roger & Træe, Cathrine Bolstad, 2014. "The financial accelerator and the real economy: A small macroeconometric model for Norway with financial frictions," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 517-537.
  4. Roger Hammersland & Cathrine Bolstad Træe, 2011. "The Financial Accelerator and the real economy. Self-reinforcing feedback loops in a core macro econometric model for Norway," Discussion Papers, Research Department of Statistics Norway 668, Research Department of Statistics Norway.

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