Microeconomic Structure determines Macroeconomic Dynamics. Aoki defeats the Representative Agent

Masanao Aoki developed a new methodology for a basic problem of economics: deducing rigorously the macroeconomic dynamics as emerging from the interactions of many individual agents. This includes deduction of the fractal / intermittent fluctuations of macroeconomic quantities from the granularity of the mezo-economic collective objects (large individual wealth, highly productive geographical locations, emergent technologies, emergent economic sectors) in which the micro-economic agents self-organize. In particular, we present some theoretical predictions, which also met extensive validation from empirical data in a wide range of systems: • The fractal Levy exponent of the stock market index fluctuations equals the Pareto exponent of the investors wealth distribution. The origin of the macroe-conomic dynamics is therefore found in the granularity induced by the wealth / capital of the wealthiest investors. • Economic cycles consist of a Schumpeter ’creative destruction ’ pattern whereby the maxima are cusp-shaped while the minima are smooth. In between the cusps, the cycle consists of the sum of 2 ’crossing exponentials’: one decaying and the other increasing. This unification within the same theoretical framework of short term market fluctuations and long term economic cycles offers the perspective of a genuine con-ceptual synthesis between micro- and macroeconomics. Joining another giant of contemporary science- Phil Anderson [1]- Aoki emphasized the role of rare, large fluctuations in the emergence of macroeconomic phenomena out of microscopic in-teractions and in particular their non self-averaging, in the language of statistical physics. In this light, we present a simple stochastic multi-sector growth model.