ABSTRACT
The relation between individual and aggregate behaviour has been frequently studied in economics. This chapter will provide a general background to a more detailed discussion which will be given in chapters 5 to 8. The emphasis of the present chapter will be on how individual behaviour and the relation between aggregates might be explained. First, however, a terminological point has to be made, namely that the notions ‘individual’ and ‘aggregate’ are treated here in a relative way. Depending on the problem at hand, it may well be that corporate bodies can be regarded as ‘individuals’. For example, house-holds or firms may be regarded as ‘individuals’ relative to the aggregate level of the economy as a whole. However, a household (firm) will be treated as an aggregate concept with respect to the different human beings that constitute the household (firm). The notion of an aggregate relationship will be used for relationships between aggregate concepts.
