Kenneth Arrow on the limits of microfoundational reductionism

19 December, 2013 at 14:08 | Posted in Economics | 1 Comment

???????????????????????????????????????????????????????????????????????????????????????????????????????????????The economy is irreducible … in the sense that no matter how the households are divided into two groups, an increase in the initial assets held by the members of one group can be used to make feasible an allocation which will make no one worse off and at least one individual in the second group better off.

It is perhaps interesting to observe that “atomistic” assumptions concerning individual households and firms are not sufficient to establish the existence of equilibrium; “global” assumptions … are also needed (though they are surely unexceptionable). Thus, a limit is set to the tendency implicit in price theory, particularly in its mathematical versions, to deduce all properties of aggregate behavior from assumptions about individual economic agents.

Kenneth Arrow

About these ads

1 Comment »

RSS feed for comments on this post. TrackBack URI

  1. further debunking of rat expectations -

    Robin Greenwood Andrei Shleifer

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at | The Pool Theme.
Entries and comments feeds.