October, 2017

Contrasting Visions for Macroeconomic Theory

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Find the paper at SSRN.

DSGE modeling remains the workhorse of contemporary macroeconomics despite a growing number of critiques of its ability to explain the aggregate properties of an economic system. For the most part, those critiques accept the DSGE presumption that traditional macro data are primitive, causal data. This leads to a stipulative style of analysis where macro variables are explained in terms of one another. In contrast, we set forth an OEE framework for an open-ended evolutionary macroeconomics. Within this framework, systems data are not primitive, but are derived from prior micro-level interactions without any presumption that those macro-level derivations reflect systemic equilibrium among the micro-level primitive sources of action. We explore some contours of an OEE model by placing coordination games within an ecological setting where there is no agent who has universal knowledge relevant to that ecology of games.