Implicit Microfoundations for Macroeconomics

Ian Wright

No 2008-41, Economics Discussion Papers from Kiel Institute for the World Economy

Abstract: A large market economy has a huge number of degrees of freedom with weak microlevel coordination. The ‘implicit microfoundations' approach assumes this property of micro-level interactions more strongly conditions macro-level outcomes compared to the precise details of individual choice behavior; that is, the ‘particle' nature of individuals dominates their ‘mechanical' nature. So rather than taking an ‘explicit microfoundations' approach, in which individuals are represented as ‘white-box' sources of fully-specified optimizing behavior (rational agents), we instead represent individuals as ‘black box' sources of unpredictable noise subject to objective constraints (zero-intelligence agents). To illustrate the potential of the approach we examine a parsimonious, agent-based macroeconomic model with implicit microfoundations. It generates many of the reported empirical distributions of capitalist economies, including the distribution of income, firm sizes, firm growth, GDP and recessions. --

Keywords: Micro foundations; macroeconomics; aggregation; power laws (search for similar items in EconPapers)
JEL-codes: E11 P16 D50 C63 B41 A12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-mac
Date: 2008
View list of references

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2008-41 (application/pdf)

Related works:
Journal Article: Implicit Microfoundations for Macroeconomics (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifwedp:7462

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy
Contact information at EDIRC.
Series data maintained by ZBW - German National Library for Economics ().