
Published online:
29 May 2014
Published in print:
20 December 2013
Online ISBN:
9780262314404
Print ISBN:
9780262019736
Contents
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4.1 Introduction 4.1 Introduction
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4.1.1 Our Four Sins: Aggregation, Rationality, Equilibrium, and Mathematics 4.1.1 Our Four Sins: Aggregation, Rationality, Equilibrium, and Mathematics
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4.2 Macroeconomic Compromises 4.2 Macroeconomic Compromises
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4.2.1 Aggregation 4.2.1 Aggregation
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4.2.1.1 Aggregation of Producers 4.2.1.1 Aggregation of Producers
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4.2.1.2 Aggregation of Consumers 4.2.1.2 Aggregation of Consumers
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Arguments for Homogeneous Preferences Arguments for Homogeneous Preferences
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Approximate Aggregation Approximate Aggregation
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4.2.1.3 Aggregation of Commodities 4.2.1.3 Aggregation of Commodities
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Smoothness and Convexity: A Sidebar Smoothness and Convexity: A Sidebar
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4.2.1.4 Aggregation and Modeling Tradeoffs 4.2.1.4 Aggregation and Modeling Tradeoffs
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4.2.1.5 An Example: The Breeden-Lucas “Fruit Tree” 4.2.1.5 An Example: The Breeden-Lucas “Fruit Tree”
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4.2.2 Rationality 4.2.2 Rationality
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4.2.2.1 No Rationality, No Utility Function 4.2.2.1 No Rationality, No Utility Function
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4.2.2.2 Bounded Rationality 4.2.2.2 Bounded Rationality
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An Example of How Model Richness Is Not Free: Households with Habits An Example of How Model Richness Is Not Free: Households with Habits
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4.2.2.3 Rational Expectations 4.2.2.3 Rational Expectations
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4.2.2.4 Expected Utility 4.2.2.4 Expected Utility
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4.2.2.5 A Provisional Summary 4.2.2.5 A Provisional Summary
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4.2.3 Equilibrium Analysis 4.2.3 Equilibrium Analysis
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4.2.3.1 Steady States and Transitions 4.2.3.1 Steady States and Transitions
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4.2.3.2 An Interesting Criticism of Steady-State Analysis 4.2.3.2 An Interesting Criticism of Steady-State Analysis
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4.2.3.3 Equilibrium Analysis: A Provisional Summary 4.2.3.3 Equilibrium Analysis: A Provisional Summary
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4.2.3.4 Race as an Equilibrium Outcome: The Work of Glenn Loury 4.2.3.4 Race as an Equilibrium Outcome: The Work of Glenn Loury
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4.2.4 Mathematics, Practicality, and Some Examples 4.2.4 Mathematics, Practicality, and Some Examples
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4.2.4.1 Mathematics and Forecasting 4.2.4.1 Mathematics and Forecasting
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4.2.4.2 Mathematics as a Language to Protect the Public from Economists 4.2.4.2 Mathematics as a Language to Protect the Public from Economists
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4.2.4.3 Example: The Continuum Assumption 4.2.4.3 Example: The Continuum Assumption
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4.2.4.4 Example: Infinitely Lived Households 4.2.4.4 Example: Infinitely Lived Households
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4.2.4.5 Example: “Social Planning Problems” 4.2.4.5 Example: “Social Planning Problems”
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4.3 Concluding Remarks 4.3 Concluding Remarks
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Cite
Athreya, Kartik B., 'Macroeconomic Shortcuts', Big Ideas in Macroeconomics: A Nontechnical View (Cambridge, MA , 2013; online edn, MIT Press Scholarship Online, 29 May 2014), https://doi.org/10.7551/mitpress/9780262019736.003.0005, accessed 4 May 2025.
Abstract
Why do macroeconomists usually work with models that seem, to many, to be ridiculous simplifications of reality that stress mathematical coherence over economic substance? This chapter addresses important aspects of macroeconomic methodology. These ideas are infrequently discussed in existing work for nonprofessional economists. There are some reasons for using an overall approach to macroeconomics that seems to give easy ammunition to critics. The chapter covers each of these four “sins”: Aggregation, Rationality, Equilibrium, and Mathematics.
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