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.
Topics:
Lars Pålsson Syll considers the following as important: Economics
This could be interesting, too:
Lars Pålsson Syll writes Post-real economics — a severe case of mathiness
Lars Pålsson Syll writes Perché la trasformazione del capitalismo è necessaria
Lars Pålsson Syll writes The Larry Summers Problem
Lars Pålsson Syll writes DSGE models — worse than useless
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.