I wrote a “review”:http://www.timeshighereducation.co.uk/story.asp?storycode=408555 a couple of weeks ago of Viktor Mayer-Schoenberger’s “Delete: The Virtue of Forgetting in the Digital Age” (“Powells”:http://www.powells.com/partner/29956/biblio/9780691138619, Amazon)

Information technology has grown so entwined with our lives that it is easy to overlook the marvels flowering forth from it. … But if Viktor Mayer-Schonberger is right, these technologies may grow to entangle and choke us. They create a kind of external memory, recording our actions and interactions in digital video footage and thousands upon thousands of digital photographs. … Mayer-Schonberger argues that these developments challenge how we organise society and how we understand ourselves. … At its heart, his case against digital memory is humanist. He worries that it will not only change the way we organise society, but it will damage our identities. Identity and memory interact in complicated ways. Our ability to forget may be as important to our social relationships as our ability to remember. To forgive may be to forget; when we forgive someone for serious transgressions we in effect forget how angry we once were at them. … Delete argues that digital memory has the capacity both to trap us in the past and to damage our trust in our own memories.

I probably should have linked to it before, but didn’t, because I wanted to combine the link with a short review of Tyler Cowen’s recent book “Create Your Own Economy: The Path to Prosperity in a Disordered World” (Powells, Amazon) As I mention in the review, Tyler’s book presents a very interesting contrast to Viktor’s. What Tyler sees as evidence of individual empowerment, Viktor sees as as a serious threat to personal identity. Viktor fears that technologies will undermine our sense of self, and our ability to remake ourselves in order to respond to a changing social environment. Tyler sees new technologies as valuable precisely _because_ they allow us to remake ourselves and our identities, creating our own ‘economies’ (here, I think he is harking back to the Greek origins of the term) or internally ordered environments by picking and choosing “small cultural bits” and assembling them according to our own personal hierarchies.
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In response to some comments, I’ve written a little bit about the representative agent assumption in Dynamic Stochastic General Equilibrium Models. I argue that, given the underlying DSGE assumptions, you won’t get very much extra by including heterogeneous agents.

But, I intend to say in the “Where next” section, it seems likely that heterogeneous and boundedly rational individuals, interacting in imperfect and incomplete markets will generate ’emergent’ macro outcomes that are not obvious from the micro foundations. Of course, this is going to be a prospectus for a theory, not the theory itself.

In the meantime, comments on my snippet would be much appreciated.

Update Looking at the responses, I think just about everyone has missed the point, which suggests that maybe I didn’t make it very well.

I’m not saying that heterogeneity doesn’t matter, but that introducing (tractable) heterogeneity into a DSGE model isn’t likely to yield radically different predictions about macroeconomic outcomes. If that’s correct, then if you think DSGE models work well (for some evaluative procedure), you can be relaxed about using representative agents. And if you don’t think DSGE models work well, the representative agent assumption isn’t the problem, or at least it isn’t the only problem.

Since my statement of the situation didn’t help much, I’ll present it as a question instead. Can anyone point me to a DSGE-style model that derives strongly non-classical results from the introduction of heterogeneity? Or, failing that, does anyone have a convincing argument that such results should emerge?

I’m aware of course that, in general, anything can happen with aggregation across heterogeneous agents, so I’m not much interested in arguments for agnosticism starting from that point. End update

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