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Some Issues Surrounding the Reduction of Macroeconomics to Microeconomics

Published online by Cambridge University Press:  01 April 2022

Alan Nelson
Alan Nelson*
Affiliation:
Department of Philosophy, University of California, Los Angeles
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Abstract

This paper examines the relationship between modern theories of microeconomics and macroeconomics and, more generally, it evaluates the prospects of theoretically reducing macroeconomics to microeconomics. Many economists have shown strong interest in providing “microfoundations” for macroeconomics and much of their work is germane to the issue of theoretical reduction. Especially relevant is the work that has been done on what is called The Problem of Aggregation. On some accounts, The Problem of Aggregation just is the problem of reducing macroeconomics to microeconomics. I show how to separate these problems and then try to determine to what extent particular kinds of solutions to The Problem of Aggregation succeed in reducing macroeconomics to microeconomics as well. I argue that reduction is not possible by this means given the current state of microeconomics. I also describe how reduction may be possible by means of (dis)aggregation if microeconomics is supplemented in a certain way with the results of experimental research on individual economic agents.

Type
Research Article
Information
Philosophy of Science , Volume 51 , Issue 4 , December 1984 , pp. 573 - 594
Copyright
Copyright © Philosophy of Science Association 1984

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Footnotes

†

I must thank Gilbert Bassett, Arthur Fine, Daniel Hausman, Alexander Rosenberg, Julius Sensat, referees for Philosophy of Science, and especially Paul Teller for helpful suggestions. Although many of these suggestions have found their way into this paper, I alone am responsible for any remaining errors or misconceptions.

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