The Representative Agent in Macroeconomics

There has been little discussion in macroeconomic literature about the propriety or usefulness of representative agent models. This volume aims to evaluate the use of these models as a means of studying aggregate behaviour.

James E. Hartley is Assistant Professor of Economics at Mount Holyoke College, Massachusetts

Acknowledgments

x

Part I Why representative agents?

Introduction

3

(6)

Macroeconomics

3

(1)

What is a representative agent model?

4

(2)

Plan of the book

6

(3)

The Origins of the Representative Agent

9

(10)

The birth of the representative agent

9

(3)

The critique and abandonment of the representative firm

12

(4)

Modern Lessons

16

(3)

Argument for the New Classical Use of Representative Agent Models

19

(14)

The return of the representative agent model

19

(1)

The first new classical representative agent model

20

(3)

The Lucas critique

23

(3)

The Walrasian tradition

26

(3)

Microfoundations

29

(1)

Discussion

30

(3)

Part II The Lucas critique

Beyond Taste and Technology Parameters in Macroeconomics

33

(26)

The Lucas critique

33

(1)

Theoretical considerations

34

(3)

An examination of Lucas (1976)

37

(3)

An example

40

(7)

Additional notes

47

(5)

Representative agents and the Lucas critique

52

(1)

Is it time to dispense with the Lucas critique?

53

(6)

Part III The Walrasian tradition

Walrasian Methodology

59

(14)

Walrasian and Marshallian traditions

59

(1)

Walrasian methodology

59

(3)

The role of Mathematics

62

(2)

Assumptions in Walrasian methodology

64

(2)

The representative agent assumption

66

(2)

The fundamental theorems?

68

(5)

Marshallian Methodology

73

(11)

Introduction

73

(2)

Mathematics in Marshallian methodology

75

(2)

The role of assumptions

77

(1)

Partial equilibrium

78

(2)

Milton Friedman

80

(2)

The representative agent

82

(2)

The New Classicals as Walrasian Economists

84

(21)

The methodology of new classical economics

84

(1)

New classical methodological statements

84

(7)

Friedman's comments on Lange

91

(10)

The new classical representative agent in a Walrasian model

101

(4)

Part IV Microfoundations

Microfoundations: Austrian Style

105

(15)

Introduction

105

(1)

Austrian methodology

106

(1)

The Austrian rejection of macroeconomics

107

(6)

The representative agent

113

(2)

Ideal types and representative agents

115

(2)

Addendum

117

(3)

The Traditional Case for Microfoundations

120

(12)

Introduction

120

(1)

The new classicals

120

(3)

The microfoundations tradition

123

(4)

What are microfoundations anyway?

127

(3)

Where does the representative agent fit in?

130

(2)

The Aggregation Problem

132

(15)

The general Problem

132

(1)

The basic theoretical results

133

(2)

Extensions

135

(7)

Responses

142

(5)

Individual and Market Experiments

147

(11)

Endogenous versus exogenous variables

147

(2)

An example: Hansen and Sargent (1980)

149

(6)

A simpler example: Hall's permanent income model

155

(2)

Concluding note

157

(1)

The Representative Agent Versus Microfoundations

158

(18)

The argument

158

(1)

The monkey model

158

(4)

Market clearing and rational expectations

162

(4)

Micro theory

166

(4)

The fallacy of composition

170

(4)

Concluding note

174

(2)

The Myth of Microfoundations

176

(21)

The myth

176

(1)

What foundation?

177

(5)

Aggregation gain

182

(2)

Theory of the firm

184

(2)

The macroeconomy as a social system

186

(3)

General equilibrium theory

189

(5)

Concluding note

194

(3)

Part V Whither macroeconomics?

After Representative Agent Models

197

(8)

The end of the representative agent

197

(3)

Whither macroeconomics?

200

(5)

Notes

205

(6)

Bibliography

211

(13)

Index

224

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The Representative Agent in Macroeconomics

Summary

Author Biography

Table of Contents

Supplemental Materials

FREE SHIPPING

Rent More, Save More! Use code: BBRENTAL

5% off 1 book, 7% off 2 books, 10% off 3+ books

The Representative Agent in Macroeconomics

Summary

Author Biography

Table of Contents

Supplemental Materials

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