Display:
I think your two observations:

Microeconomics is almost a branch of psychology, because it is fundamentally about behaviour

and:

Macroeconomics, on the other hand, is like thermodynamics. It deals with economic systems so large that the specific details of the economic behaviour of individuals are irrelevant

Are pertinent.  I think your observation that microeconomics is almost a psychology is exactly right.  However, I strongly disagree with your conclusion about macroeconomics, even though I believe your supporting statements about individual behavior being irrelevant, etc., to be correct.

I think with macroeconomics, what we're witnessing is group psychology and behavior.  In these fields, individual behavior and predictions are next to impossible while large groups tend to act predictably.  Thus, it is tempting to think of it as a science which can be mathematically explained.

But that's very wrong.  The seeming stability of macroeconomics is explained by group behavior and things like disbursal of responsibility which make larger groups more stable than smaller ones.

The key difference is that the laws of thermodynamics will still exist even if everyone in the world stops believing in them.  The same cannot be said of the economy.  You're correct that individual behavior has little effect, but group behavior does.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Mon Nov 14th, 2005 at 06:38:02 PM EST
[ Parent ]
Hmmm, psychohistory all over again.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon Nov 14th, 2005 at 06:43:34 PM EST
[ Parent ]
Exactly!  ;-)

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Mon Nov 14th, 2005 at 06:50:28 PM EST
[ Parent ]
Intelligible does not mean predictable. I think I may eventually have to write a diary about this, but in the meantime I'll just drop a name, Stuart Kauffman, and suggest the last few chapters of his book At Home In the Universe.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon Nov 14th, 2005 at 07:09:51 PM EST
[ Parent ]

Display:
Login
. Make a new account
. Reset password
Occasional Series