Macroeconomics 1: Heterogeneity, Dynamics and Welfare

Macroeconomics 1 is devoted to foundational and methodological issues, which are not always considered in current reviews of the subject. Rather than treating aggregates as given or assuming that they can be microfounded through the behaviour of representative agents, this book highlights the aggregation problem itself in the presence of heterogeneity among households, production sectors and agents’ information. It provides a methodological initiation to dynamical systems and a conceptual exploration of adaptive learning as an alternative to standard rational expectations modeling. Finally, this book covers macroeconomic theory from both normative and positive perspectives − discussing welfare economics, and focusing on social justice and distributional issues, before addressing political economy, particularly in relation to stabilization policy, income distribution and institutional design.