Discussion Paper

No. 2008-41 | December 16, 2008
Implicit Microfoundations for Macroeconomics

Abstract

A large market economy has a huge number of degrees of freedom with weak micro-level 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.

Paper submitted to the special issue "Reconstructing Macroeconomics"

Data Set

JEL Classification:

A12, B41, C63, D50, E11, P16

Assessment

  • Downloads: 2306

Links

Cite As

Ian Wright (2008). Implicit Microfoundations for Macroeconomics. Economics Discussion Papers, No 2008-41, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2008-41


Comments and Questions


Duncan Foley - Wright Microfoundations
January 25, 2009 - 16:15

My comment on Ian Wright's paper is attached.


Anonymous - Referee Report
April 23, 2009 - 08:52

see attached file


Ian Wright - Reply to Referee Report
April 29, 2009 - 08:26

see attached file