Whom or What Does the Representative Individual Represent?
Macroeconomic models often assume that the choices of all the diverse agents in one sector—consumers for example—can be considered as the choices of one "representative" standard utility maximizing individual whose choices coincide with the aggregate choices of the heterogeneous individuals. My basic point is that the reduction of the behavior of a group of heterogeneous agents even if they are all themselves utility maximizers, is not simply an analytical convenience as often explained, but is both unjustified and leads to conclusions which are usually misleading and often wrong. First, such models are particularly ill-suited to studying macroeconomic problems like unemployment, which should be viewed as coordination failures. Furthermore these models, instead of being a hive of activity and exchange, are frequently, ones in which no trade at all takes place. And this is just the beginning of a list of problems with this approach. Finally I will consider more positive alternatives to the representative individual approach—approaches that focus on heterogeneity of agents may and interaction between individuals. It is clear that the "representative" agent deserves a decent burial, as an approach to economic analysis that is not only primitive, but fundamentally erroneous.
Volume (Year): 6 (1992)
Issue (Month): 2 (Spring)
|Contact details of provider:|| Web page: https://www.aeaweb.org/jep/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Jerison, 1997.
"Nonrepresentative Representative Consumers,"
97-01, University at Albany, SUNY, Department of Economics.
- E. Eisenberg, 1961. "Aggregation of Utility Functions," Management Science, INFORMS, vol. 7(4), pages 337-350, July.
- Caplin, Andrew & Nalebuff, Barry, 1991.
"Aggregation and Imperfect Competition: On the Existence of Equilibrium,"
Econometric Society, vol. 59(1), pages 25-59, January.
- Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
- Kirman, Alan P & Oddou, Claude & Weber, Shlomo, 1986. "Stochastic Communication and Coalition Formation," Econometrica, Econometric Society, vol. 54(1), pages 129-138, January.
- Nils H. Hakansson & J. Gregory Kunkel & James A. Ohlson., 1981.
"Sufficient and Necessary Conditions for Information to Have Social Value in Pure Exchange,"
Research Program in Finance Working Papers
122, University of California at Berkeley.
- Hakansson, Nils H & Kunkel, J Gregory & Ohlson, James A, 1982. " Sufficient and Necessary Conditions for Information to Have Social Value in Pure Exchange," Journal of Finance, American Finance Association, vol. 37(5), pages 1169-1181, December.
- Sah, Raaj K, 1991.
"Social Osmosis and Patterns of Crime,"
Journal of Political Economy,
University of Chicago Press, vol. 99(6), pages 1272-1295, December.
- Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
- Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
- Arthur Lewbel, 1989. "Exact Aggregation and a Representative Consumer," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 621-633.
- Summers, Lawrence H, 1991. " The Scientific Illusion in Empirical Macroeconomics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(2), pages 129-148.
- Timothy J. Kehoe, 1985. "Multiplicity of Equilibria and Comparative Statics," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 119-147.
- Mantel, Rolf R., 1976. "Homothetic preferences and community excess demand functions," Journal of Economic Theory, Elsevier, vol. 12(2), pages 197-201, April.
- Lippi, Marco, 1988. "On the dynamic shape of aggregated error correction models," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 561-585.
- Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 229-264.
- A. P. Kirman & K. J. Koch, 1986. "Market Excess Demand in Exchange Economies with Identical Preferences and Collinear Endowments," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 457-463.
- Quah, Danny, 1990.
"Permanent and Transitory Movements in Labor Income: An Explanation for "Excess Smoothness" in Consumption,"
Journal of Political Economy,
University of Chicago Press, vol. 98(3), pages 449-475, June.
- Quah, D., 1989. "Permanent And Transitory Movements In Labor Income: An Explanation For "Excess Smoothness" In Consumption," Working papers 535, Massachusetts Institute of Technology (MIT), Department of Economics.
- Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:117-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.