More to our point is the issue of going from decision-making individuals to the aggregate level. The extremely talented late Harvard economist Emmanuel Farhi, working with UCLA’s David Baqaee, showed that we need to consider the (unexplained) input-output structure of production in order to understand macroeconomic fluctuations: we cannot just derive it from individual representative agents.
Similarly, Harvard’s Pol Antràs (with co-authors) has recently been reconstructing the theory of international trade by assuming that the world is organized through global value chains instead of standard markets. This apparently minor assumption makes huge differences both in theory and in terms of trade-policy implications. We are barely starting to understand what it means in practice, because, up to now, we had not bothered to collect the requisite firm-to-firm data.
Economists may be a bit dense, but mathematicians are not.
These studies show that meso-structures matter for how cities and countries grow, and how technologies develop. Given the current orthodoxy, these papers have been unpublishable in economics journals, because they cannot show how these structures are linked to individuals making decisions under constraints.
We avoid waiting in line.
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