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Reconstructing Macroeconomics

Reconstructing Macroeconomics
A Perspective from Statistical Physics and Combinatorial Stochastic Processes

$110.00

Part of Japan-US Center UFJ Bank Monographs on International Financial Markets

  • Date Published: November 2006
  • availability: In stock
  • format: Hardback
  • isbn: 9780521831062

$110.00
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About the Authors
  • The authors treat macroeconomic models as composed of large numbers of micro-units or agents of several types and explicitly discuss stochastic dynamic and combinatorial aspects of interactions among them. In mainstream macroeconomics sound microfoundations for macroeconomics have meant incorporating sophisticated intertemporal optimization by representative agents into models. Optimal growth theory, once meant to be normative, is now taught as a descriptive theory in mainstream macroeconomic courses. In neoclassical equilibria flexible prices led the economy to the state of full employment and marginal productivities are all equated. Professors Aoki and Yoshikawa contrariwise show that such equilibria are not possible in economies with a large number of agents of heterogeneous types. They employ a set of statistical dynamical tools via continuous-time Markov chains and statistical distributions of fractions of agents by types available in the new literature of combinatorial stochastic processes, to reconstruct macroeconomic models.

    • Senior author Aoki is arguably the world's leading scholar of stochastic analysis in macroeconomics
    • Builds on his two previous books for the Press, both authors major prize winners
    • Treats hot area of multiple interactions of diverse agents
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    Reviews & endorsements

    "Thoughtful macroeconomists are uncomfortably aware that consumers, firms, and workers vary widely in their local environments, perceptions, and beliefs. Ignoring this heterogeneity, as 'modern macro' does, is a likely source of systematic error. Aoki and Yoshikawa propose to repair this failure by modelling the macroeconomy explicitly as a cloud of interacting particles. The goal is to deduce the distributions of economic characteristics that describe the system as a whole. This puts more emphasis on statistical properties, and less on the internal decision-making of each agent. There are already some surprising beginning results including a novel treatment of aggregate demand, and one can expect more when their approach is combined with standard economic reasoning. This is the start, not the finish, of a potentially far-reaching research program. It should excite the curiosity of all those thoughtful macroeconomists." -Robert Solow, Nobel Laureate, Massachusetts Institute of Technology

    "Reconstructing Macroeconomics is an ambitious, informative, challenging…book that addresses fundamental questions of economic theory on many levels. In my view mainstream macroeconomists can only benefit by becoming familiar with the point of view Aoki and Yoshikawa represent so ably here…. Those who aspire to create a new macroeconomics, including the various schools of 'heterodox' economics, can also learn a lot from this book." - Journal of Economic Behavior and Organization

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    Product details

    • Date Published: November 2006
    • format: Hardback
    • isbn: 9780521831062
    • length: 352 pages
    • dimensions: 240 x 163 x 23 mm
    • weight: 0.613kg
    • contains: 11 tables
    • availability: In stock
  • Table of Contents

    Preface 1 Masanao Aoki
    Preface 2 Hiroshi Yoshikawa
    1. Introduction - a new approach to macroeconomics
    2. The methods - jump Markov processes and random partitions
    3. Equilibrium as distribution - the role of demand in macroeconomics
    4. Uncertainty trap - policy ineffectiveness and long stagnation of the macroeconomy
    5. Slow dynamics of the macro system - no mystery of inflexible prices
    6. Business cycles - an endogenous stochastic approach
    7. Labor market dynamics - a new look at natural unemployment and Okun's law
    8. Demand saturation - creation and economic growth
    9. The types of investors and volatility in financial markets - analyzing clusters of heterogeneous agents
    10. Stock prices and the real macroeconomy - power-law versus exponential distributions.

  • Authors

    Masanao Aoki, University of California, Los Angeles
    fm.author_biographical_note1

    Hiroshi Yoshikawa, University of Tokyo
    fm.author_biographical_note2

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