Talk:Aggregation problem

arguing interminably

The aggregation problem has left economists arguing interminably over issues that need to be resolved. This important article could be strenghened by recent additional references, preferably to refereed work. There is a post Interdependence: A Strategic Problem for Economicsin the blog The Kinky Economistthat finds circumstances under which aggregate demand depends on the set of goods demanded. The same post argues that relative changes in income within an economic system determine the behavior of the whole.

Kreps, Keen or Kleen ?

Kreps goes on to say, "So what can we say about aggregate demand based on the hypothesis that individuals are preference/utility maximizers? Unless we are able to make strong assumptions about the distribution of preferences or income throughout the economy (everyone has the same homothetic preferences for example) there is little we can say. ..” The strong assumptions are that everyone has the same tastes and that each person’s taste remain the same as income changes so each additional income is spent exactly the same way as all previous dollars. As Keen notes the first assumption amounts to assuming that there is a single consumer the second that there is a single good. Kleen further states —Preceding unsigned comment added by 82.230.55.219 (talk) 12:02, 23 November 2009 (UTC)[reply]

necessary vs. sufficient conditions

Aside from other problems (such as lack of inline citations and a good bit of original research), this article repeatedly confuses necessary and sufficient conditions.

For example: First to sum the demand functions it must be assumed that they are independent - no, it must not be assumed although it usually is. It is possible that interdependent individual demand functions can be summed up though this usually requires additional assumptions and specific functional forms.

Another example: the summation produces a smooth aggregate curve only if the individual curves have identical shapes - it's not an "only if". And of course "smooth" should be defined, but generally you can gets smooth aggregate curves in a lot of other cases. For example with "many" agents with widely idiosyncratic tastes/demands, you can get a smooth curve if their idiosyncrasies cancel each other out (Alan Kirman somewhere states that aggregation works best if people are identical OR if they are very very heterogeneous - it's the in between that causes problems).

Furthermore, these two aspects aren't all that important to the aggregation problem. Most of the work that deals with interdependent demand functions, like consumption externalities, doesn't spend much time worrying about aggregation problems and rather skips right to studying the properties of the aggregate. Likewise, smoothness is nice, mostly because you can take a derivative and such but it is non-essential for most applications.

What's really important for aggregation of demands is basically in the last section. However Keen is not an authority or a reliable source here (and in fact is just flat out wrong).radek (talk) 16:33, 24 December 2009 (UTC)[reply]

Aggregating individual consumer demand curves presents several problems

Re: "Aggregating individual consumer demand curves presents several problems"

Good as it is, this argument could be made even stronger. The participants in an economic system are not independent. They are interdependent as a direct consequence of the division of labor. See the article on economic interdependence.Temple Bayliss (talk) 15:26, 17 May 2011 (UTC)[reply]

There is a post Interdependence: A Strategic Problem for Economicsin the blog The Kinky Economistthat finds circumstances under which aggregate demand depends on the set of goods demanded. The same post argues that relative changes in income within an economic system determine the behavior of the whole.