This book is an attempt to reformulate macroeconomic modeling as currently practiced by the macroeconomic profession.

The need to improve macroeconomic models certainly is felt widely by the economic profession. A short list of the defects that we recognize in macroeconomic modeling includes extensive and almost exclusive use of the assumption of representative agents, of largely deterministic dynamic models, and inadequate attention paid to off-equilibrium dynamic phenomena. More specifically, we do not have a satisfactory model for explaining sluggish responses of macroeconomic phenomena and the distributional effects of policy actions. We lack adequate treatments of the dynamic adjustment behavior of microeconomic units in the presence of externalities of the kind designated “field effects” in this book, and are known variously in the economic literature as social influence, social consumption, or group sentiments or pressure.

This book collects my recent investigations to provide an alternative manner for building and analyzing models in macroeconomics; it is addressed to macroeconomists and advanced graduate students in macroeconomics. The book is arranged in three parts. Part I consists of three chapters. After a short introductory discussion of motivation for developing a new way to construct and analyze macroeconomic models in Chapter 1, Chapter 2 provides some simple, motivating examples of the proposed approaches. An explicitly stochastic or statistical approach is taken in Chapter 3. It collects some material that I use in the remainder of the book, since this material is not usually in the toolkit of practicing macroeconomists and is not taught in traditional economics graduate courses.