The representative agent has long been a central device in modern macroeconomics, providing a simplification of economic behaviour by collapsing the diverse decisions of millions of individuals into the choices of a single “stand-in” actor. Its roots lie in neoclassical economics, where general equilibrium theory required tractable models of consumer and producer behaviour. By assuming a single household and a single firm, theorists could impose rational optimisation and equilibrium conditions without the complexities of heterogeneous agents and institutions. This abstraction gained prominence in the postwar era, particularly through the development of dynamic stochastic general equilibrium (DSGE) models, which crystallised around the representative agent as their core behavioural assumption.
Read MoreEvolutionary economics emerged in the late twentieth century as a heterodox response to the limitations of neoclassical theory. Richard R. Nelson, together with Sidney G. Winter, pioneered this approach in An Evolutionary Theory of Economic Change (1982), offering a dynamic framework for understanding innovation, firm behaviour, and institutional development. Their work remains central to the study of technological change and long-run growth.
Read MoreThe Coase Theorem occupies a central place in modern economic thought, reshaping how scholars and policymakers understand externalities, property rights, and the role of government intervention. Named after the British economist Ronald H. Coase, it originated in his landmark article The Problem of Social Cost (1960), which has become one of the most cited works in the history of economics. Coase’s insight was both deceptively simple and radically transformative: under certain conditions, private bargaining between individuals can solve problems of externalities without the need for state intervention. This challenged the then-dominant Pigovian framework, which emphasised taxes and subsidies to internalise external costs and benefits.
Read MoreThe Coase Theorem occupies a central place in modern economic thought, reshaping how scholars and policymakers understand externalities, property rights, and the role of government intervention. Named after the British economist Ronald H. Coase, it originated in his landmark article The Problem of Social Cost (1960), which has become one of the most cited works in the history of economics. Coase’s insight was both deceptively simple and radically transformative: under certain conditions, private bargaining between individuals can solve problems of externalities without the need for state intervention. This challenged the then-dominant Pigovian framework, which emphasised taxes and subsidies to internalise external costs and benefits.
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