Conundrums of the Representative Agent

Abstract

This paper examines the increased use of the utility-maximizing representative agent in both contemporary macroeconomics (DSGE in particular) and microeconomics (revealed preference theory in particular). It is argued that the economists who developed Walrasian general equilibrium theory and revealed preference theory during the middle of the twentieth century were aware that the use of a single representative agent would simplify their analysis, but sill resisted employing it. The paper discusses a number of developments – both within economic theory and more broadly – that accommodated the rise of the representative agent in more recent economic theory.