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Title:Implicit Microfoundations for Macroeconomics PDF Logo
Authors:Wright, Ian
Issue Date:2008
Series/Report no.:Economics Discussion Papers / Institut für Weltwirtschaft 2008-41
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.
Subjects:Micro foundations
macroeconomics
aggregation
power laws
JEL:E11
P16
D50
C63
B41
A12
Creative Commons License:http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type:Working Paper
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers

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