Thought for the day: on scarcity (of clothes)
from Merijn Knibbe
Nowadays we’ve got these DSGE models. DSGE: that’s Dynamic Stochastic General Equilibrium. Part of the rhetorics of these intensely neo classical articles is a ritual phrase that they have ‘sound’ or ‘non trivial’ micro foundations. As ‘micro’ in economics means: the individual man of woman, the individual household or the individual company one might expect models which, though neo-classical and therefore not allowing for lasting connections between atomistic individuals, still start at the individual level – to work their way up to the macro level. Wrong. They just superimpose, with only this ritual phrase as justification, the neo-classical choice model upon the sector households, firms and the like. DSGE models do not have sound micro foundations. But they also do not have unsound micro foundations. They have no micro foundations at all.
Real micro foundations of aggregate variables and developments are possible. They can even be exciting (Braun, 1990 (1960)). Economic Historians have for quite some time used ‘agent based statistics’, i.e. different sets of aggregate data based upon the exactly same set of individual persons or households (Levine, 1987). Economic statisticians are following suit, at the moment. That’s sound, that’s non-trivial. That’s scientific.
A really good micro/meso level history book: Braun, R., ‘Industrialisation and everyday life’ (Cambridge, 1990, original Swiss edition in 1960).
Levine, D., Reproducing families. The political economy of english population history, Themes in the Social Sciences (Cambridge 1987).