David Glasner responds to Tom Brown:
The problem with an emergent representative agent is that you need to explain emergence before you know what the emergent representative agent actually looks like, so I don’t see that arguing in terms of an emergent representative agent actually accomplishes anything. It still seems to me like a form of question begging.
I'd completely agree with David's sentiment in the case where you are actually trying to understand how something works. That is to say my recent set of posts talking about an emergent representative agent are actually meta-arguments. Updating my language a bit to use Gary Becker's paper, I am trying to argue three things:
- The use of rational agents is not an immediate reason for mainstream economic theory to be wrong on its face. There's a lot of what Noah Smith calls lazy econ criticism that makes arguments like 'economists assume rational people, but people aren't rational ... LOL'. If a seemingly rational agent on average can emerge from irrational behavior, then takes the wind out of the sails of behavioral theories.
- Microfoundations are probably irrelevant to macroeconomics. Macroeconomics can have very different properties from its microfoundations. This should have been well understood after the SMD theorem, but as Kirman [pdf] says the representative agent tries to sneak around it. Showing that the emergent representative agent relevant to macro can have very different properties from the individual micro-agents should put a stop to the sneaking.
- Since rational agents can emerge from solely the properties of opportunity sets, let's skip the middleman (middle-agent?) and just use the mathematics of opportunity sets. The mathematics of opportunity sets is information theory (what messages could be constructed "given the opportunity" to use x bits). This information theory leads to basic supply and demand logic (but allows for specific failure modes) and is the impetus behind my paper.
The first argument amounts to a defense of a swath of traditional economics. The second is a swipe at a different swath. The third is a potential third way -- or more like a rethink of the traditional diagram approaches.