Heterogeneous agent macroeconomics has a long history, and it raises many questions

The Undercover Historian

A cornerstone of thoughtful and lazy criticisms of mainstream macroeconomics alike is the idea that macroeconomists have spent 40 years just writing infinitely lived representative agent models (in which all agents behave the same way and are eternal), and isn’t it a ridiculous assumption? To which mainstream macroeconomics invariably respond: “heterogeneous agent models are all over the place,” which is in turn invariably met with “yes, but this is a very recent development.” I have myself long considered the development of heterogeneous agent macro as a response to the 2008 crisis. Then I began working on the history of economics at Minnesota, and I realized that by the mid-1980s, heterogeneous agent models were alreadyall over the place. Much of the current discussions on the-state-of-macro are premised on a flawed historical narrative. And acknowledging that representative agent models have long coexisted with heterogeneous agent models of various stripes raises a…

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About Jim Rose

Utopia - you are standing in it promotes a classical liberal view of the world and champion the mass flourishing of humanity through capitalism and the rule of law. The origin of the blog is explained in the first blog post at https://utopiayouarestandinginit.wordpress.com/2014/03/12/why-call-my-blog-utopia-you-are-standing-in-it/

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