The aggregation problem in economics refers to the difficulty of treating empirical or theoretical aggregates as though they reacted analogously to the behavior of optimizing individual agents as described in general microeconomic theory (Fisher, 1987, p. 54). Examples of aggregates in micro- and macroeconomics relative to less aggregated counterparts are: Face-to-face trading interactions on the New York Stock Exchange trading floor. ... A central concept in science and the scientific method is that all evidence must be empirical, or empirically based, that is, dependent on evidence or consequences that are observable by the senses. ... In economics, an agent is an element of a model who solves an optimization problem. ... Microeconomics (literally, very small economics) is a social science which involves study of the economic distribution of production and income among individual consumers, firms, and industries. ... This article does not cite its references or sources. ...

• food vs. apples
• the price level and real GDP vs. the price and quantity of apples
• the capital stock for the economy vs. the value of computers of a certain type and the value of steam shovels
• the money supply vs. paper currency
• the general unemployment rate vs. the unemployment rate of civil engineers.

Standard theory uses simple assumptions to derive general, and commonly accepted, results such as the law of demand to explain market behavior. An example is the abstraction of a composite good, which treats the price of one good changing proportionately to all other goods. If this assumption is violated and the agents are subject to aggregated utility functions and production functions, restrictions on the latter are necessary to drive analysis. The aggregation problem emphasizes: The price level is a measurement of the average level of prices in an economy. ... In economics, the gross domestic product (GDP) is a measure of the amount of the economic production of a particular territory in financial capital terms during a specific time period. ... the economys total quantity of capital goods is called the capital stock This page is a candidate for speedy deletion. ... A steam shovel is a large steam-powered excavating machine designed for lifting and moving material such as rock and soil. ... Money supply (monetary aggregates, money stock), a macroeconomic concept, is the quantity of money available within the economy to purchase goods, services, and securities. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... // Definition A composite good is an abstraction used in economics that represents all other choices of consumption that can be made. ... This article is about utility in economics and in game theory. ... In microeconomics, a production function expresses the relationship between an organizations inputs and its outputs. ...

• how broad the restrictions are in microeconomics
• that use of broad factor inputs ('labor' and 'capital'), real 'output', and 'investment', as if there was only a single such aggregate is without a solid foundation for rigorously deriving analytical results.

Franklin Fisher (1987, p. 55) notes that this has not dissuaded macroeconomists from continuing to use such terms.

See also

• Cambridge capital controversy
• "The Methodology of Positive Economics"
• Neoclassical economics
• Price index
• Real versus nominal value
• Social choice theory

The Cambridge Capital Controversy refers to a 1960s debate in economics concerning the nature and role of capital goods (or means of production). ... Milton Friedmans book Essays in Positive Economics (1953) has as its lead an original essay The Methodology of Positive Economics, on which this article focuses. ... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ... This article does not cite its references or sources. ... Nominal value is the value of anything expressed in money of the day, versus real value which removes the effect of inflation. ... Social choice theory studies how individual preferences are aggregated to form a collective preference. ...

References

• Franklin M. Fisher (1987). "aggregation problem," The New Palgrave: A Dictionary of Economics, v. 1, pp. 53-55.
• John R. Hicks (1939, 2nd ed. 1946). Value and Capital.