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The Macrofoundations of Micro

Author

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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.

Suggested Citation

  • David C. Colander, 1993. "The Macrofoundations of Micro," Eastern Economic Journal, Eastern Economic Association, vol. 19(4), pages 447-457, Fall.
  • Handle: RePEc:eej:eeconj:v:19:y:1993:i:4:p:447-457
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume19/V19N4P447_457.pdf
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    References listed on IDEAS

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    1. Howitt, Peter, 1985. "Transaction Costs in the Theory of Unemployment," American Economic Review, American Economic Association, vol. 75(1), pages 88-100, March.
    2. Sargent, Thomas J. & Wallace, Neil, 1976. "Rational expectations and the theory of economic policy," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 169-183, April.
    3. 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.
    4. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    5. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
    6. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
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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, vol. 72(2), pages 293-318, April.
    2. 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, vol. 36(C), pages 517-537.
    3. Elke Muchlinski, 2005. "The Lucas Critique and Keynes Response.Considering the History of Macroeconomics," Macroeconomics 0503019, EconWPA.
    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 668, Statistics Norway, Research Department.

    More about this item

    Keywords

    Macroeconomics;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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