Economists have an imaginary person they call a “representative agent,” who is about as realistic as the Easter bunny or the Abominable Snowman.
The representative agent is supposed to stand in for all of us in a model of how the economy works: 335 million Americans, for example, boiled down to one.
As originally conceived, the representative agent is fully rational and unemotional, forward-looking and with perfect information about all the relevant facts.
“It is clear that the ‘representative’ agent deserves a decent burial,” Alan Kirman, then of European University Institute in Florence, Italy, wrote in The Journal of Economic Perspectives in 1992.
Paul Romer, then of New York University, indicted the representative agent among other culprits in 2016 in a scathing critique that began, “For more than three decades, macroeconomics has gone backward.”
Persons:
”, ” Alan Kirman, Paul Romer
Organizations:
European University Institute, New York University
Locations:
Florence, Italy