By Kartik B. Athreya
Macroeconomists were caricatured both as credulous savants in love with the wonderful thing about their mathematical types or as free-market fundamentalists who admit doubtless as to the market's knowledge. during this booklet, Kartik Athreya attracts a more true photograph, providing a nontechnical description of renowned principles and versions in macroeconomics, and arguing for his or her price as interpretive instruments in addition to their coverage relevance. Athreya intentionally leaves out the technical equipment, supplying an important consultant to the occasionally summary principles that force macroeconomists' examine and sensible coverage advice.
Athreya describes the most method of macroeconomic version building, the foundational Walrasian general-equilibrium framework, and its sleek model, the Arrow-Debreu-McKenzie (ADM) version. within the center of the publication, Athreya exhibits how the Walrasian technique shapes and unifies a lot of recent macroeconomics. He information versions imperative to ongoing macroeconomic analyses: the neoclassical and stochastic development types, the common incomplete-markets version, the overlapping-generations version, and the commonplace seek version. Athreya's obtainable primer strains the hyperlinks among the perspectives and coverage recommendation of recent macroeconomists and their shared theoretical approach.
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Additional resources for Big Ideas in Macroeconomics: A Nontechnical View
But it is a possibility—and notice that here too, the underlying change that “caused” the others was a change in the “fundamentals” of the economy; that is, the news about improvements in future electricity production. Thus, even in a case where the data make it appear as if one event caused another, things are not so obvious. For an example of a formal analysis of a model in which stock prices are not causing consumption or savings, but where both are indeed responding to a single exogenous (outside) factor, see Lantz and Sarte (2001).
Without the modern approach, one would be helpless to predict the effects of such policies, as no historical data, by definition, can really help predict the effect of anything truly novel. Macroeconomic data are closest to an in-game statistical summary for a team sport. It will be obvious to anyone in sports that such data require interpretation, and do not by themselves tell a definitive story or provide the last word in guidance for future actions. Rather, it is clear to anyone who knows any sport that such a summary is a statement about the joint presence of various constellations of players, and expectations of future constellations, from each team, rather than a statement about any one player.
14 In many cases, when using the ADM models, macroeconomists will assume that household preferences satisfy some additional properties beyond rationality: often those of monotonicity, convexity, and local nonsatiation. Monotonicity just imposes that households always prefer more to less, and as such, implies that they can never get satiated. Here, both the level of aggregation of the good and the time periods described by the model matter. On a given day, for example, I can easily imagine myself getting too full of pecan pie, but less so of food as a whole, and even less of pecan pie in a given year.
Big Ideas in Macroeconomics: A Nontechnical View by Kartik B. Athreya