How Macroeconomics Lost the Complexity Vision
How Macroeconomics Lost the Complexity Vision
This chapter tells the story of how macroeconomics developed as a separate field in an attempt to add aspects of complexity to the standard model with the aim of improving policy advice, but how those aspects of complexity were quickly lost it again. Instead of dealing with the macro economy as a complex system, macro economists focused on dotting is and crossing ts. The chapter begins by clarifying the difference between macroeconomics and microeconomics. Microeconomics builds a theory up from the individual elements—from the micro level to the macro level. It starts from assumptions of rational individuals and then analyzes how they would coordinate their actions, and what role the state should play in that coordination. Macroeconomics developed as a separate branch of economics when J. M. Keynes’s work was integrated into formal models in the 1930s and 1940s.
Keywords: economic policy, microeconomics, macroeconomics
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