A framework for aggregation theories

Abstract

The past literature on aggregation theory is surveyed in terms of three nested formal models. The most general one distinguishes exogenous and endogenous variables, both for a micro- and a corresponding macro-model; it shows why the main problem lies in aggregation of exogenous variables; it suffices in particular for Leontief's results on commodity aggregates. The aggregation of economic relations further assumes that the micro-model is individualized; the case of aggregate production functions shows how varied are the micro-models that may be selected for the discussion. The statistical approach, moreover, introduces the distribution of individual characteristics and individual exogenous variables; it leads to a new view of exact aggregation; more importantly it draws attention to structural stability and to the study of factors explaining shifts in the statistical distribution of micro-variables and -parameters. The success of this approach explains why aggregation theory increasingly requires empirical research.