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An aggregate in economics
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
 is a summary measure describing a market or economy. The aggregation problem refers to the difficulty of treating an empirical
Empirical

The word empirical denotes information gained by means of observation, experience, or experiment, as opposed to theory. A central concept in science and the scientific method is that all evidence must be empirical, or empirically based, that is, dependent on evidence or Logical consequence that are observable by the senses....
 or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent
Agent (economics)

In economics, an agent is an actor or decision maker in a Mathematical model. Typically, the actor makes decisions by solving an Optimization problem....
 as described in general microeconomic theory (Fisher, 1987, p. 54). Examples of aggregates in micro- and macroeconomics
Macroeconomics

Macroeconomics is a branch of economics that deals with the performance, structure, and behavior of a national or regional economy as a whole....
 relative to less aggregated counterparts are: Standard theory uses simple assumptions to derive general, and commonly accepted, results such as the law of demand
Law of demand

In economics, the law of demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases....
 to explain market behavior.






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An aggregate in economics
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
 is a summary measure describing a market or economy. The aggregation problem refers to the difficulty of treating an empirical
Empirical

The word empirical denotes information gained by means of observation, experience, or experiment, as opposed to theory. A central concept in science and the scientific method is that all evidence must be empirical, or empirically based, that is, dependent on evidence or Logical consequence that are observable by the senses....
 or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent
Agent (economics)

In economics, an agent is an actor or decision maker in a Mathematical model. Typically, the actor makes decisions by solving an Optimization problem....
 as described in general microeconomic theory (Fisher, 1987, p. 54). Examples of aggregates in micro- and macroeconomics
Macroeconomics

Macroeconomics is a branch of economics that deals with the performance, structure, and behavior of a national or regional economy as a whole....
 relative to less aggregated counterparts are:
  • food vs. apples
  • the price level
    Price level

    A price level is a hypothetical measure of overall prices for some set of Good s and Service s, in a given region during a given interval, normalized relative to some base set....
     and real GDP
    Real GDP

    Real GDP is a macroeconomic measure of the size of an economy adjusted for price changes and inflation. It measures in constant prices the output of final goods and services and incomes within an economy....
     vs. the price and quantity of apples
  • the capital stock for the economy vs. the value of computers of a certain type and the value of steam shovel
    Steam shovel

    A steam shovel is a large steam engine excavating machine designed for lifting and moving material such as rock and soil. It is the earliest type of power shovel....
    s
  • the money supply
    Money supply

    In economics, money supply, or money stock, is the total amount of money available in an economy at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits....
     vs. paper currency
  • the general unemployment rate vs. the unemployment rate of civil engineers.
Standard theory uses simple assumptions to derive general, and commonly accepted, results such as the law of demand
Law of demand

In economics, the law of demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases....
 to explain market behavior. An example is the abstraction of a composite good
Composite good

In economics, demand for a Good is often the focus as to a change in its price. A composite good is an abstraction used in economics that represents all goods in the relevant Consumer theory#Model setup besides the one in question....
. It considers the price of one good changing proportionately to the composite good, that is, all other goods. If this assumption is violated and the agents are subject to aggregated utility functions, restrictions on the latter are necessary to yield the law of demand. The aggregation problem emphasizes:
  • how broad such restrictions are in microeconomics
  • that use of broad factor inputs ('labor' and 'capital'), real 'output', and 'investment', as if there was only a single such aggregate is without a solid foundation for rigorously deriving analytical results.
Franklin Fisher (1987, p. 55) notes that this has not dissuaded macroeconomists from continuing to use such terms.

See also

  • Cambridge capital controversy
    Cambridge capital controversy

    The Cambridge capital controversy was a 1960s debate in economics concerning the nature and role of capital goods . The name arises because of the location of those most involved in the controversy: the debate was largely between economists such as Joan Robinson and Piero Sraffa at the University of Cambridge in England and economists such...
  • The Methodology of Positive Economics
    Essays in Positive Economics

    Milton Friedman's book Essays in Positive Economics has as its lead an original essay "The Methodology of Positive Economics," on which this article focuses....
  • Neoclassical economics
    Neoclassical economics

    Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distribution s in markets through supply and demand, often as mediated through a hypothesized maximization of income-constrained utility by individuals and of cost-constrained profits of firms employing avai...
  • Price index
    Price index

    A price index is a normalized average of prices for a given class of Good s or Service s in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations....
  • Real versus nominal value
    Real versus nominal value

    In economics, nominal value refers to any price or value expressed in money of the day, as opposed to real value, which adjusts for the effect of inflation....
  • Social choice theory
    Social choice theory

    Social choice theory studies how measures of individual interests, values, or welfares in theory could be aggregated to reach a collective decision....