Journal Article
No. 2009-19 | May 11, 2009
Implicit Microfoundations for Macroeconomics
(Published in Special Issue Reconstructing Macroeconomics)

Abstract

A large market economy has a huge number of degrees of freedom with weak micro-level coordination. The "implicit microfoundations" approach considers this property of micro-level interactions to more strongly determine 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.

Data Set

JEL Classification:

A12, B41, C63, D50, E11, P16

Assessment

Links

Cite As

Ian Wright (2009). Implicit Microfoundations for Macroeconomics. Economics: The Open-Access, Open-Assessment E-Journal, 3 (2009-19): 1–27. http://dx.doi.org/10.5018/economics-ejournal.ja.2009-19


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