Tuesday, June 24, 2014

The whole is greater than the sum of its parts

Livio Di Matteo in What's in a Name?:
We all know that the word “economics” comes from the Greek “okionomia” which refers to the thrifty management of household affairs. By extension, the origin of the term “economy” is closely related to the same term as it is from the Latin “oeconomia”, which is again from the same Greek “okionomia”.  From all this, it is not difficult to see an economy as simply the agglomeration of individual households when it comes to the European language tradition.  In a sense this nicely encompasses both our micro and macro traditions, as macroeconomics simply becomes the study of the sum of many individual household behaviours.

No no no no no no no: "macroeconomics simply becomes the study of the sum of many individual household behaviours." No.

That's what people think? No wonder the economy is such a mess.

1 comment:

The Arthurian said...

Why do wolves and other pack hunters and social animals fail to develop civilizations?

Because for social animals and pack hunters, the reach of their obligations to one another cannot extend beyond the pack. Because they don't use money to keep track of their obligations to one another.

We, on the other hand, are still paying off the Vietnam war and two World Wars. We use money to keep track of obligations, and it binds us together.

Monetary balances bind us together into groups larger than tribes and more long-lasting than lifetimes. Monetary balances bind us into civilizations.

Monetary balances are overlooked by those who say that the macro economy is the sum of its microeconomic parts.

BTW, that is the underlying theme of everything I write on this blog.