Implicit Microfoundations for Macroeconomics

Implicit Microfoundations for Macroeconomics

A large market economy has a huge number of degrees of freedom with weak microlevel coordination. The ‘implicit microfoundations’ approach considers this property of micro-level interactions to more strongly determine macro-level outcomes compared to the precise details of individual choice behavior; that is, the ‘particle’ nature of individuals dominates their ‘mechanical’ nature. So rather th...

Microfoundations and Macroeconomics

The Microfoundations of Macroeconomics

We consider the microfoundations controversy from the perspective of economic evolution and show that the debate can benefit from lessons learned in evolutionary biology. Although the analogy between biology and economics has been noted before, it has rarely focused on clarifying the micro-macro distinction in economic theory and modelling. The macroevolution controversy in biology has generate...

The Microfoundations of Macroeconomics: An Evolutionary Perspective

Simple Microfoundations for Cobb-Douglas Matching Functions

This paper derives a Cobb-Douglas matching function as the aggregate of the number of matches made by each firm in a large economy using results from the theory of heavy tail distributions. The model is then calibrated using the empirical distribution of firm sizes and stylized facts about social networks.The implied elasticity of the matching function is found to be close to those reported by ...