Reconstructing Macroeconomics

Having sound “micro foundations for macroeconomics” has been long taken as building sophisticated optimization of an individual economic agent into a macro model. Thus, the “micro-founded” macroeconomics today begins with optimization of the representative consumer. In stark contrast to this main-stream approach in economics, it is widely recognized in natural sciences such as physics, chemistry, biology, and ecology, that a different approach is necessary when we analyze macro system consisting of a large number of micro units. The guiding principle there is that precise behavior of micro unit is irrelevant; we must resort to statistical approach to macro system as a whole. Why not in macroeconomics? The co-editors of the special issue advocated this idea in their book entitled Reconstructing Macroeconomics, Cambridge University Press, 2007.

We solicit papers that are intrinsically probabilistic, that is, based broadly on the principle of statistical physics. Key words such as power-law (Pareto-Zipf-Gibrat law), and econophysics may give you some idea.

We are particularly interested in knowing implications of the new stochastic approach, for macroeconomics, and how such approach is fruitfully integrated to macroeconomics. These are, however, just suggestions. Any other papers that incorporate significant probabilistic components are welcome.