The Making of the BAM Model
The illuminating prose of Friedrich von Hayek illustrates some of the main issues that are at the core of the bottom-up approach to macroeconomics we offer in this book. The inhabitants of the realistic economies we aim to model form expectations and take actions building on the asymmetric and incomplete information they acquire by exploring limited portions of space and time, while their dispersed market transactions generate aggregate outcomes whose welfare properties are unknowable in principle, at least if one pretends to measure them against some hypothetical Walrasian general equilibrium. The quotation has also a second value added in that it helps us to stress once again that this vision, though considered as heretical by the mainstream, does not represent anything particularly new from a theoretical viewpoint. On the contrary, it is part and parcel of a well-honored but guiltily disregarded tradition in the history of economic thought, one that considers the economic agent as a proper human being instead of a computer-like automaton. We argue that it is time not only to bring this tradition back to life, but also to revamp it by means of new insights from other behavioral sciences, like cognitive psychology and social biology.