“There is no such thing as macroeconomics.”Or so William Allen reports Armen Alchian as saying. The quote comes from a new article in Econ Journal Watch untitled A Life among the Econ, Particularly at UCLA by William R. Allen.
Jerry O'Driscoll argues that Alchian didn't deny there were aggregate economic phenomena, only that theory must be microeconomic. O'Driscoll also argues that this was in substance Hayek's view as well.
Makes sense to me.
3 comments:
I've been trying for ages to get this encapsulated in a resonant phrase. Not really succeeding as the best I can come up with is:
"In the long run it's all micro".
Anyone do better?
Tim: How about, "In all runs its micro"?
While I agree that microeconomics is the underlying business - the pillar of all economic analysis, this doesn't mean there is no macro. It just means that macro should be an applied version of micro.
Furthermore, trying to do macro from direct first principles would also mean you never reach a conclusion - unless you can somehow use data to help you out. I mean, over an aggregate economy there is going to be A LOT of strategic interactions that can't be properly signed, and a bunch of situations with multiple eqm.
That is why macro economists use representative agent models AND stylised facts to try to get some understanding of the aggregate economy.
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