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Micro foundations for meso and macro economic theory

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Abstract

The natures of rational thought and rational lives are described as the basis of an adaptive economizing theory which presents an alternative microeconomic foundation contrasting with but complementary to optimal control theory for modeling mesoeconomic order. Contrastingly, that micro foundation seems to imply the inappropriateness of representing macro data as an optimal economic agent. Rather, direct representation of the emergent causal order in the macroeconomic data is suggested.

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Notes

  1. Cournot (1963, p. 14).

  2. Mises (Reprint 2005).

  3. It is worth quoting Mannheim, a fellow academic at this point: “Academic [concepts] tend to become sterile because they fail to take cognizance of the world outside academia.” (Mannheim 1936, p. 73).

  4. Chapter 11, Poincaré (1952).

  5. The founders of the discipline had nothing else in mind. The necessity for emphasizing the point is the very different interpretation prevalent in much of contemporary theorizing.

  6. I do not recall seeing this concept in works of economic theory but have come across related arguments in philosophical writings, John Dewey (1958), for example, and after writing this passage, Bratman (1987).

  7. For a general, abstract formalization of this theory, see Day (2004).

  8. Note the implicit paradox: An economy wide equilibrium that generates the equilibrium prices for a given economic sector would depend on that sector's output. Thus, the solution of the sector's optimal control model and the prices on which that solution is based cannot be independent.

  9. It is worth noting that the Emergent Macro Economy is quite analogous to the emergent Newtonian macro order of the Solar System. The sun, planets, and moons are all agglomerations of micro components that for purposes of explanation and prediction of change in the macro order can be treated without building them up from the constituent micro components.

  10. Day and Yang, “From Keynes to Solow to Cooley–Prescott: An Encompassing Theory of Growth and Macroeconomic Policy.” Available from the authors on request.

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  1. University of Southern California, Kaprielian Hall (KAP) 318a, Los Angeles, CA, 90089-0253, USA

    Richard H. Day

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  1. Richard H. Day
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Correspondence to Richard H. Day.

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Day, R.H. Micro foundations for meso and macro economic theory. J Evol Econ 18, 261–273 (2008). https://doi.org/10.1007/s00191-007-0084-2

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