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Macroeconomics and Complexity: Inflation Theory


  • Axel Leijonhufvud

    (Center for Computable Economics)


The complaints about today's macroeconomics are familiar to all. The economy is not modelled as an evolving system exhibiting emergent properties. Behavior is represented as precalculatedly optimal rather than adaptive. Actions are assumed to be prereconciled by rational expectations rather that brought into consistency by market interaction. Heterogeneity of goods or of agents is all but completely denied. The infinite horizon optimizing representative agent model is not altogether representative of today's macroeconomics. We also have models with two types of mortal agents (overlapping generations) and some models with asymmetric information or externalities capable of producing coordination failures of a sort. But generally speaking these too tend to be subject to the same complaints. A overview of today's macroeconomics for a Santa Fé audience might only too easily deteriorate into a catalogue of models to which these complaints and reservations apply in varying combinations. Rather than tire you with such a litany, I will describe a set of (somewhat atypical) empirical phenomena, explain why I do not think they are handled well by current macroeconomics, and end with a few suggestions about how they might be attacked. If these suggestions were to start a critical discussion, I would find that helpful.

Suggested Citation

  • Axel Leijonhufvud, "undated". "Macroeconomics and Complexity: Inflation Theory," Working Papers _013, University of California at Los Angeles, Center for Computable Economics.
  • Handle: RePEc:wop:callce:_013

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    References listed on IDEAS

    1. Savit, R., 1989. "Nonlinearities And Chaotic Effects In Options Prices," Papers 184, Columbia - Center for Futures Markets.
    2. Scheinkman, Jose A & LeBaron, Blake, 1989. "Nonlinear Dynamics and Stock Returns," The Journal of Business, University of Chicago Press, vol. 62(3), pages 311-337, July.
    3. Willey, Thomas, 1992. "Testing for nonlinear dependence in daily stock indices," Journal of Economics and Business, Elsevier, vol. 44(1), pages 63-76, February.
    4. Hinich, Melvin J & Patterson, Douglas M, 1985. "Evidence of Nonlinearity in Daily Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 69-77, January.
    5. Hsieh, David A, 1989. "Testing for Nonlinear Dependence in Daily Foreign Exchange Rates," The Journal of Business, University of Chicago Press, vol. 62(3), pages 339-368, July.
    6. Diebold, Francis X. & Nason, James A., 1990. "Nonparametric exchange rate prediction?," Journal of International Economics, Elsevier, vol. 28(3-4), pages 315-332, May.
    7. repec:gue:guelph:1988-15 is not listed on IDEAS
    8. Frank, Murray & Gencay, Ramazan & Stengos, Thanasis, 1988. "International chaos?," European Economic Review, Elsevier, vol. 32(8), pages 1569-1584, October.
    9. Makridakis, Spyros, 1993. "Accuracy measures: theoretical and practical concerns," International Journal of Forecasting, Elsevier, vol. 9(4), pages 527-529, December.
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