Macroeconomics As Systems Theory

Abstract

This essay is the penultimate draft of Chapter 1 of a book that carries the working title Macroeconomics as Systems Theory: Emergence, Institutions, and Economic Process. This book examines the material of macroeconomic theory by looking through a different analytical window from what most theorists use. The conventional analytical window shows a national economy as a collection of such aggregate variables as output, employment, investment, and a price level, and seeks to develop theoretical relationships among those variables. The macro level of an economy is accessed directly through the variables created through the national income and product accounts and similar series of aggregate data. In contrast, I treat the relation between micro and macro theories as a relation between the parts of something and the entirety of that thing. Hence, the analytical object to which macro theory pertains entails a higher order of complexity than that of micro theory. Where micro variables are aptly characterized as objects of choice, macro variables are not. To the contrary, macro variables are products of emergent interaction and spontaneous ordering. Furthermore, there is no position of “policymaker” who stands outside the macro system, for all economizing action occurs inside the economic system.