Reconstructing Macroeconomics: A Perspective from Statistical Physics and Combinatorial Stochastic Processes
The authors treat macroeconomic models as composed of large numbers of micro-units or agents of several types and explicitly discuss stochastic dynamic and combinatorial aspects of interactions among them. In mainstream macroeconomics sound microfoundations for macroeconomics have meant incorporating sophisticated intertemporal optimization by representative agents into models. Optimal growth theory, once meant to be normative, is now taught as a descriptive theory in mainstream macroeconomic courses. In neoclassical equilibria flexible prices led the economy to the state of full employment and marginal productivities are all equated. Professors Aoki and Yoshikawa contrariwise show that such equilibria are not possible in economies with a large number of agents of heterogeneous types. They employ a set of statistical dynamical tools via continuous-time Markov chains and statistical distributions of fractions of agents by types available in the new literature of combinatorial stochastic processes, to reconstruct macroeconomic models.
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aggregate demand aggregate output analysis asset prices assume assumption behavior Beveridge Curve Boltzmann–Gibbs business cycles capital changes clusters conﬁgurations consumer consumption deﬁned deﬁnition demand pattern demand shares denote depends distribution of productivity dynamics economic agents economic growth economists equilibrium Ewens Sampling Formula example excess demand expected value exponential distribution fact factor Figure ﬁnal ﬁnancial markets ﬁnd ﬁrms ﬁrst ﬁxed ﬂow ﬂuctuations fraction given growth rate high productivity sectors households increase industry inﬂation interest rate investment Japanese economy jump Markov process Keynesian large number liquidity trap macro macroeconomics Markov process master equation micro normal distribution number of agents obtain Okun’s law optimization parameter percent power law power-law distributions probability distribution proﬁt real economy representative agent satisﬁes signiﬁcant simulations Speciﬁcally stochastic stock prices theory total output transition rates unemployed unemployment rate workers zero