A Branch of Economics is Missing Micro-Micro Theory

Abstract

JN THE LIFE HISTORY of most sciences there are movements toward the study of larger aggregates or toward the detailed study of smaller and more fundamental units. My impression is that in most fields the movement toward the study of more micro units has predominated. Yet in economics in the 1930's the movement was in the macro direction. Both physics and biology (in the last three decades) have made great strides by studying smaller and smaller entitiesphysics by studying more minute fundamental particles and biology by studying the fundamental elements determining genetics. In a general sense economics has not been moving in this direction, although some work of this nature exists. The purpose of this paper is to review some samples of the work that exists and to argue that this area must become a major field of economic research and study. The question of how individuals in multiperson firms influence firm decisions seems like such a natural question to ask that it is amazing that it is not part of the formal agenda of economists as a profession. Of course it has been asked, but not by present-day economists in their professional capacity. In other words, micromicroeconomics has never become an established field. For the most part, theorists have not only not raised this question, but they have continued to develop micro theory in such a way as to discourage economists from raising this question. Part of the reason for this lies in the maximizing and optimizing biases of conventional micro theory, and part can be ascribed to the consequences of the long period required to refine the theory so that elements that did not fit the basic model were discarded.'