Macroeconomic Shortcuts
Macroeconomic Shortcuts
Why do macroeconomists usually work with models that seem, to many, to be ridiculous simplifications of reality that stress mathematical coherence over economic substance? This chapter addresses important aspects of macroeconomic methodology. These ideas are infrequently discussed in existing work for nonprofessional economists. There are some reasons for using an overall approach to macroeconomics that seems to give easy ammunition to critics. The chapter covers each of these four “sins”: Aggregation, Rationality, Equilibrium, and Mathematics.
Keywords: Aggregation, Representative Agent, Breeden-Lucas Fruit Trees, Rational Expectations, Expected Utility, Equilibrium Analysis, Steady State Analysis
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