Tuesday, 5 February 2013

What a theory of 'aggregate demand shortfall' shares with explanations of 'the market'

Following on from yesterday's posting about alternative models of political/economic/moral actors at the trans-individual level I am also reminded of another posting I did a while back mentioning mercantilism.  Two observations seem clear to me now.  Firstly, that mercantilism, following close on the heels of Hobbes's great  master-work of political economy, was also an example of an explanatory rule book which was also pitched at the aggregate level.  But secondly, that this rule-book was wrong.  Just because a philosopher or political economist can invent such a trans-individual rule book for aggregate pseudo-actors, it doesn't follow that this rule-book is in practice any good.  Mercantilism was an example, I think.  That is to say, it is an additional open question to evaluate the field of possible aggregate-based explanations of national actors.  Some will work for a given moment in time better than others.  Mercantilism certainly has its own chapter in the history of the modern nation state, but it can lay no a priori claim to be the 'best' model.  That's a question of scientific investigation, ideally.

Another example is theoretical and practical examples involving 'The Market' as aggregate actor.  The Austrian school seems generally happy to disembody when desired, and pull in market average at short notice.  Recovering individual market fact states in the face of knowledge of the aggregate state can help,

'The Market'  is today for us just as emergent a phenomenon as mercantilism.   Could not the consensus opinion of the market be wrong too?  It is strange how the Austrians live with the management of the body politic through markets-based economy but criticise violently the aggregate based macro of Keynes.

It seems to me you can't know without looking whether one or another aggregates-based explanation works or not.  Some will, some won't.  You can't write them off just because they're aggregates based per se.