The Mathematization of Macroeconomics. A Recursive Revolution
AbstractFrank Ramsey's classic framing of the dynamics of optimal savings,  as one to be solved as a problem in the calculus of variations and Ragnar Frisch's imaginative invoking of a felicitous Wicksellian metaphor to provide the impulse-propagation dichotomy, in a stochastic dynamic framework, for the tackling the problem of business cycles , have come to be considered the twin fountainheads of the mathematization of macroeconomics in its dynamic modes − at least in one dominant tradition. The intertemporal optimization framework of a rational agent, viewed as a signal processor, facing the impulses that are propagated through the mechanisms of a real economy, provide the underpinnings of the stochastic dynamic general equilibrium (SDGE) model that has become the benchmark and frontier of current macroeconomics. In this paper, on the 80th anniversary of Ramsey's classic and the 75th anniversary of Frisch's Cassel Festschrift contribution, an attempt is made to characterize the mathematization of macroeconomics in terms of the frontier dominance of recursive methods. There are, of course, other - probably more enlightened − ways to tell this fascinating story. However, although my preferred method would have been to tell it as an evolutionary development, since I am not sure that where we are represents progress, from where we were, say 60 years ago, I have chosen refuge in some Whig fantasies.
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Bibliographic InfoArticle provided by Società editrice il Mulino in its journal Economia politica.
Volume (Year): (2008)
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- K. Vela Velupillai, 2008. "The Mathematization of Macroeconomics: A Recursive Revolution," Department of Economics Working Papers 0807, Department of Economics, University of Trento, Italia.
- B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
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