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Aggregation (Production)

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Abstract

Aggregation in production concerns the conditions under which macro production functions can be derived from micro production functions. Microeconomic theory elegantly treats the behaviour of optimizing individual agents in a world with an arbitrarily long list of individual commodities and prices. However, the desire to analyse the great aggregates of macroeconomics - gross national product, inflation, unemployment, and so forth - leads to theories that treat such aggregates directly. The aggregation ‘problem’ matters because without proper aggregation one cannot interpret the properties of such macroeconomic models. This is particularly true as regards the production sector.

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© 2008 Palgrave Macmillan, a division of Macmillan Publishers Limited

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Felipe, J., Fisher, F.M. (2008). Aggregation (Production). In: Durlauf, S.N., Blume, L.E. (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-58802-2_19

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