In other words, maybe Prescott is wrong, and an emergent "macroeconomics" does exist that can't easily be predicted by modeling people as "purposeful decision makers", as Athreya insists we do throughout most of Big Ideas. If that's the case, then departures from the Walrasian equilibrium base case can't be modeled by imagining how individuals would behave in response to the missing markets.
The whole of part 3 is really interesting stuff. It makes me want to see what I can do with using the information transfer framework and Arrow-Debreu-McKenzie equilibrium ... Does maximum entropy select a particular macro equilibrium when they aren't unique? There are actually gazillions (a technical term) of equilibria in an ideal gas (e.g. trade spatial positions of any subset of atoms and you get another equilibrium), but they're all described by a single set of macro state variables related by the ideal gas law: p V = n R T.
Jason, by "whole of part 3" you mean part 3 of Noah's review, right? Have you read Big Ideas in Macroeconomics?
ReplyDeleteYes; the whole thing is good, but part 3 is particularly relevant to this blog.
DeleteAnd no I haven't read the underlying book. This may be another case of a book review that's more interesting than the book itself like Shalizi's review of Red Plenty on crookedtimber ...