Analytical TOC For Athreya

I finally finished Kartik Athreya's book, Big Ideas in Economics: A Nontechnical View. I have already offered two comments on it. I do not expect it to be successful. Do not look here for a discussion of the theory of the second best, the aggregation of production functions, the distinction between risk and uncertainty, or the problems with microeconomics (despite its point being that macroeconomics, as the author understands it, is applied microeconomics). Athreya does select and address some theoretical objections, such as the Sonnenschein-Debreu-Mantel theorem, related difficulties with using a representative agent, and the folk theorem in game theory. I was disappointed not to see an informed discussion of the relationship of steady state models, such as the Solow growth model, to very short run models such as the Arrow-Debreu model. On the other hand, you will find a lot of rationalization of assumptions on the ground that they are needed (useful?) to get definite conclusions, independent of any discussion of whether or not models with those models work empirically.

Anyways, I read the book on my Kindle. I found it difficult to keep the thread. So I have prepared the following analytical table of contents for my own use, if I should reread sections. I think Athreya could have gone through a couple more edits, reconsidering this structure. For example, maybe the book would have been more understandable with shorter and more chapters.

• Acknowledgements
• I. Introduction
• I.1 Why do Macroeconomists Think What They Think and Do What They Do?
• I.2 Whom Do I Want to Reach?
• I.3 Some Key Features
• I.4 Pictures, Talk, and Homework
• 1. The Modern Macroeconomic Approach and the Arrow-Debreu-McKenzie Model
• 1.1 Introduction
• 1.2 What is a Macroeconomic Model?
• 1.2.1 Macroeconomics as Hyperorganized Narrative with Hard-Nosed Data and Logic Checks
• 1.2.1.1 Ensuring Internal Consistency
• 1.2.1.2 informed Criticism
• 1.3 How Do Macroeconomists Account for the Facts?
• 1.3.1 How Macroeconomists Argue with Each Other (or, How to Argue with a Macroeconomist, if You Must!)
• 1.3.1.1 Step 1: They Tell Each Other Who Is in Their Model Economy, and What Those Participants Want to Do: Household Preferences and Firm Profit Maximization
• 1.3.1.2 Step 2: They Tell Each Other What Their Model's Participants Have: Endowments and Technology
• 1.3.1.3 Step 3: They Tell Each Other How Model Participants Can Interact: Trading Arrangements
• 1.3.1.4 Step 4: They Tell Each Other How Participants Will Interact: Equilibrium as Prediction
• 1.3.1.5 It Takes a Model to Beat a Model
• 1.4 Macroeconomic "Equilibrium": What It Does and Does Not Imply
• 1.5 Payoffs from the Standard Macroeconomic Model Building Recipe
• 1.5.1 Making Logical Errors Easier to Spot
• 1.5.2 Disciplining Claims about Causal Relationships
• 1.5.3 Better Policy Analysis: Welfare Economics
• 1.5.4 Better Policy Analysis: The "Lucas Critique"
• 1.5.4.1. All Models Are Susceptible to the Lucas Critique, but Some More Than Others
• 1.5.5 Making the Tent Bigger
• 1.6 The Benchmark Macroeconomic Model: Arrow-Debreu-McKenzie
• 1.6.1 Understanding the Basic ADM Structure Is a Must
• 1.6.2 ADM Terminology
• 1.6.2.1 Households: Preferences and Endowments
• 1.6.2.2 Firms
• 1.6.2.3 Profit Maximization
• 1.6.2.4 Markets and Prices
• 1.6.2.5 Pareto Efficiency and the Core
• 1.6.2.6 Don't Misunderstand Pareto Efficiency
• 1.6.3 The ADM Model: An Example and a Picture
• 1.7 Concluding Remarks
• 2. Prices, Efficiency, and Macroeconomics
• 2.1 Introduction
• 2.2 A Fanciful Macroeconomic Trading Institution: The Walrasian Clearinghouse
• 2.3 Why Is This Trading Process Interesting?
• 2.3.1 The First Welfare Theorem
• 2.3.2 Why Are Walrasian Outcomes So "Coordinated"? Some Intuitions
• 2.3.3 The Incentival Role of Prices
• 2.3.4 The Informational Role of Prices
• 2.3.4.1 Prices as Aggregators of Information
• 2.3.4.2 Prices as Conveyers of Information
• 2.4 Walrasian Prices Will Exist
• 2.4.1 Time and Uncertainty
• 2.4.2 Convexity and Existence
• 2.5 Decentralized Outcomes and the First Welfare Theorem
• 2.5.1 Decentralized Trade Seems to Generate "Workable" Outcomes
• 2.5.2 Decentralized Trade Seems to Centralize (and Locate Ownership) Sensibly
• 2.5.3 "ADM Minus Some Markets" Seems Like a Useful Description of the Real World
• 2.5.3.1 Externalities as Missing Markets
• 2.6 Should the Real World Look Like One in Which Most Trading Is Run Via a WCH, and If So, Why? Theoretical Foundations for Walrasian Equilibria
• 2.6.1 The Axiomatic or "Cooperative Game Theory" Approach
• 2.6.1.1 The Equivalence Principle
• 2.6.2 The Noncooperative Approach
• 2.6.2.1 Nash Equilibrium: The Most Important Kind of Equilibrium in Social Science
• 2.6.2.2 Why Look at "Nash" Outcomes? Because "Not Nash" Means "Not Likely"
• 2.6.2.3 What If Interactions Are Repeated and Not Anonymous
• 2.6.2.4 When Should Households and Firms Take Prices as Given?
• 2.6.2.5 Market Games
• 2.6.2.6 Summary of the Noncooperative Approach
• 2.6.3 The Experimental Approach
• 2.6.3.1 Markets as Calculators
• 2.6.3.2 Experiments, the Invention of New Trading Institutions, and Mechanism Design
• 2.7 The ADM Model Does Not Require "Perfect Information" to Deliver Pareto-Optimal Outcomes; It Requires a Complete Set of Walrasian Prices
• 2.7.1 The Interpretation of Prices: What's at Stake?
• 2.8 Some Real-World Complications
• 2.8.1 Walrasian Prices Are Sufficient, but Not Necessary
• 2.8.2 Costless Enforcement
• 2.8.3 Market Power
• 2.8.4 Imperfect Monitoring
• 2.8.4.1 The Myerson-Satterthwaite Theorem
• 2.8.4.2 The Revelation Principle
• 2.8.4.3 Further Reading
• 2.9 The Observational Implications of the ADM Model
• 2.9.1 Sonnenschein-Mantel-Debreu...
• 2.9.2 ...and Boldrin-Montrucchio
• 2.9.2.1 Does It Mean That "Anything Will Happen"? No
• 2.10 A Macro-Hippocratic Moment
• 2.11 Concluding Remarks
• 3. Macroeconomists, Efficiency, and Inequality
• 3.1 Economists, Efficiency, and Inequality
• 3.1.1 Decentralized Trading and Inequality
• 3.1.2 Economists' Preoccupation with "Efficiency"
• 3.1.3 Deadweight Loss from Taxation
• 3.2 The Second Welfare Theorem
• 3.2.1 The Welfare Theorems Inspire a Form of Central Planning!
• 3.2.2 A General Lesson of the Second Welfare Theorem: Taxes Can Hurt
• 3.2.3 Caveat 1: What's an "Initial" Endowment, Anyway?
• 3.2.4 Caveat 2: Knowledge and the Limits to Lump-Sum Redistribution
• 3.2.5 Caveat 3: Lump-Sum Redistribution Might Require Surprising People
• 3.2.6 The Second Welfare Theorem Does Not Require More Assumptions than the First Welfare Theorem
• 3.3 What's Right with Non-Lump Sum Taxes? Or, Sometimes Lump-Sum Taxes Are Bad for "Insurance"
• 3.3.1 Jargon Digression" "Ex-Ante" and "Ex-Post" Pareto Efficiency
• 3.3.2 Back to Lump-Sum Taxes Being Bad for Insurance...
• 3.3.3 Why Shouldn't I Trade Ex-Ante Efficiency for Equity?
• 3.3.3.1 Why Efficiency Is Important
• 3.4 A General Approach to Thinking about Allocations and Trading Institutions: Mechanism Design
• 3.4.1 Limits on Mechanisms
• 3.4.1.1 Implementing Social Outcomes: Gibbard-Satterthwaite and the Importance of the "Solution Concept"
• 3.4.1.2 Why Do Macroeconomists Care about Mechanism Design, and Why Should Policymakers?
• 3.5 Concluding Remarks
• 4. Macroeconomic Shortcuts
• 4.1 Introduction
• 4.1.1 Our Four Sin: Aggregation, Rationality, Equilibrium, and Mathematics
• 4.2 Macroeconomic Compromises
• 4.2.1 Aggregation
• 4.2.1.1 Aggregation of Producers
• 4.2.1.2 Aggregation of Consumers
• 4.2.1.3 Aggregation of Commodities
• 4.2.1.4 Aggregation and Modeling Tradeoffs
• 4.2.1.5 An Example: The Breeden-Lucas "Fruit Tree"
• 4.2.2 Rationality
• 4.2.2.1 No Rationality, No Utility Function
• 4.2.2.2 Bounded Rationality
• 4.2.2.3 Rational Expectations
• 4.2.2.4 Expected Utility
• 4.2.2.5 A Provisional Summary
• 4.2.3 Equilibrium Analysis
• 4.2.3.1 Steady States and Transitions
• 4.2.3.2 An Interesting Criticism of Steady-State Analysis
• 4.2.3.3 Equilibrium Analysis: A Provisional Summary
• 4.2.3.4 Race as an Equilibrium Outcome: The Work of Glenn Loury
• 4.2.4 Mathematics, Practicality, and Some Examples
• 4.2.4.1 Mathematics and Forecasting
• 4.2.4.2 Mathematics as a Language to Protect the Public from Economists
• 4.2.4.3 Example: The Continuum Assumption
• 4.2.4.4 Example: Infinitely Lived Households
• 4.2.4.5 Example: "Social Planning Problems"
• 4.3 Concluding Remarks
• 5. Benchmark Macroeconomic Models
• 5.1 ADM and the Real World
• 5.2 Time, Uncertainty, and the ADM Model
• 5.2.1 The Long Arm Attached to the Invisible hand
• 5.2.1.1 The Impossibility of Literal Arrow-Debreu Market Completeness
• 5.3 The Radner Version of the ADM Economy
• 5.3.1 A Summary of Radner Trading
• 5.3.2 Spot Markets and IOU Markets: Radner and How Macroeconomists Think about Market Dysfunction
• 5.3.2.1 Spots Are OK
• 5.3.2.2 IOUs, Maybe Not So Much?
• 5.3.2.3 Radner and the Real World: A Brief Recap
• 5.4 Many Important Macroeconomic Models Are Mainly Versions of Radner Economies
• 5.5 Macroeconomic Policy: A Brief General Discussion
• 5.5.1 What Is a Policy?
• 5.5.2 Two Questions to Ask before "Doing Policy"
• 5.5.2.1 Question 1: How Are the Preconditions for the First Welfare Theorem Violated?
• 5.5.2.2 Question 2: Why Do You Think You Can Do Better?
• 5.5.2.3 One Reason to Think You Can Do Better: Coordination Failure
• 5.5.3 Coordination Failure and Macroeconomics
• 5.6 Important Macroeconomic Models and Policy Implications
• 5.7 The Mother of All Walrasian Macroeconomic Models: Neoclassical Growth Models
• 5.7.1 Step 1: The Malthusian Growth Model: No Capital
• 5.7.2 Step 2: The Solow Growth Model: No Fixed Inputs
• 5.7.2.1 Labor-Saving Devices
• 5.7.2.2 Balanced-Growth Steady States
• 5.7.2.3 The Role Savings Rates Play in Living Standards
• 5.7.2.4 The Solow Model as a First Unified Model of Growth and Fluctuations
• 5.7.3 Step 3: The Modern Neoclassical Growth Model: Enter the Consumer
• 5.7.4 What Happens When There Is Uncertainty? The Stochastic Neoclassical Growth Modek
• 5.7.4.1 Deterministic and Stochastic Steady States
• 5.7.5 What Payoffs Do Stochastic Neoclassical Growth Models Offer Us?
• 5.7.5.1 A Step Toward a Unified Theory of Growth and Fluctuations
• 5.7.5.2 They Operationalize the ADM Model
• 5.7.5.3 Stochastic Neoclassical Growth Provides a Benchmark
• 5.7.6 The Influence of Neoclassical Growth Models on How We Think about Some Key Macroeconomic Issues
• 5.7.6.1 Macroeconomics Can Be Stable
• 5.7.6.2 Technological Progress is the Gift Horse
• 5.7.6.3 The Lives of Indian and American Barbers
• 5.7.6.4 Higher Tax Rates Mean Lower Income Levels, but May Not Lower Long-Run Growth Rates
• 5.7.6.5 The ADM Model Is Silent on Innovation
• 5.8 How Do Macroeconomic Models Provide Quantitative Information? Calibration and Estimation
• 5.8.1 Calibration and Estimation: Taking a Model Very (Too?) Seriously
• 5.9 The SGM and Keynesian Macroeconomics
• 5.9.1 Keynesian Economics and the SGM I: Coordination Failures
• 5.9.2 Keynesian Economics and the SGM II: Sticky Prices
• 5.9.2.1 Is Monopolistic Competition a UFO?
• 5.9.2.2 Tensions, Tensions
• 5.10 Less-Than-Perfect Worlds: The Standard Search Model, the Standard Incomplete Markets Model, and the Overlapping Generations Model
• 5.10.1 Who Knew?
• 5.10.2 No Representative Agent: Heterogeneity Galore
• 5.10.2.1 Equilibrium Doesn't Mean "Good": Redux
• 5.11 The Reality of Decentralized-Decentralized Trade: The Search Model
• 5.11.1 Optimal Decisions and Stationary Equilibria
• 5.11.2 What Kinds of Questions Can We Address with Search Models?
• 5.11.3 Keynesian Economics and the Search Model
• 5.11.3.1 Search Is Not Really about Searching
• 5.11.3.2 Search Models and Voluntary versus Involuntary Unemployment
• 5.11.3.3 What, Exactly, Is Being Traded? Walrasian Economics and the Importance of Defining the "Commodity Space"
• 5.12 The Reality of Missing Markets: The Standard Incomplete-Market Model
• 5.12.1 The Income Fluctuation Problem (IFP): The Lynchpin of Modern Macroeconomics
• 5.12.1.1 SIM Models: "IFPs in GE"
• 5.12.1.2 Stationary Equilibria
• 5.12.1.3 SIM as a Macroeconomic Model of Bounded Rationality
• 5.12.1.4 What Search and IM Models Give Us (I): Insurance vs. Incentives: The First Quantitative Pass
• 5.12.1.5 What Search and IM Models Give Us (II): Competitive Theories of Inequality
• 5.12.1.6 What Search and IM Models Give Us (III): Maybe "Competition" Isn't All That Great?
• 5.12.1.7 How Incomplete Are Decentralize Trading Arrangements?
• 5.12.1.8 It's the IOU Markets
• 5.13 The Reality of Life and Death: The Overlapping-Generations Model
• 5.13.1 Economists Get Precise about Policy, Inequality, and Intergenerational Conflict
• 5.14 Concluding Remarks
• 6. Macroeconomic Theory and Recent Events
• 6.1 Introduction
• 6.2 The Financial Crisis of 2007-2008: What Are the Questions?
• 6.2.1 The Facts: A Crisis Reading List
• 6.2.2 Radner and Financial Intermediation
• 6.2.3 What (Good) Are Financial Markets, and How Does the ADM Model Influence How Macroeconomists View Them?
• 6.3 Models for Question 1: Why Did Asset Prices Rise So Much?
• 6.3.1 Demand and Supply
• 6.3.2 Principal-Agent Conflicts
• 6.3.3 Financial Markets and the Importance of Beliefs
• 6.3.4 Differences of Opinion
• 6.3.5 Bubble Detection
• 6.3.5.1 What "Efficient Financial Markets" Means (Hint: It Does Not Mean Pareto Efficiency)
• 6.3.5.2 The EMH and "Random Walks"
• 6.4 Models for Question 2: Why Did Initial Changes Get Amplified
• 6.4.1 Debt
• 6.4.2 Models of Banks and Bank Runs
• 6.5 Models for Question 3: Why Has the Recovery Been So Slow?
• 6.5.1 Labor and Asset Market Search Models
• 6.6 Macroeconomics and the Financial Crisis of 2007-2008 Implications for Policy
• 6.6.1 (Try to End) "Too Big to Fail"
• 6.6.2 Asset Prices and Policy
• 6.6.2.1 The Great Price Diagnosis Dilemma for PolicyMakers
• 6.6.3 Spillovers and Ronald Coase
• 6.6.4 Ronald Coase and Macroeconomics
• 6.6.5 Dynamic Games
• 6.6.5.1 Things "off the Equilibrium Path" Can Matter for Things on It
• 6.6.5.2 The Limited Commitment of Benevolent Policymakers: Time Inconsistency
• 6.6.5.3 Consumer and Sovereign Debt
• 6.6.5.4 Ex-Ante versus Ex-Post Efficiency...Again
• 6.7 Macroeconomics and the Financial Crisis of 2007-2008: Navel Gazing and a Response to Those Gazing at Our Navels
• 6.7.1 Does Modern Macroeconomics Favor Laissez-Faire?
• 6.7.2 Where Did We Fail?
• 6.7.3 Criticism of DSGE Models
• 6.7.4 Reforming Macroeconomics
• 6.7.5 Policy: Some Perspective and a Caution
• 6.7.5.1 Global Policy Coordination
• 6.7.5.2 A Caution
• 6.8 What Should Macroeconomists Be Doing?
• Notes
• References
• Index