Complexity Explorer Santa Fe Institute

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Introduction to Renormalization

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1.1 Introduction » Quiz Solution

Which of these could be a variable in a "macroeconomic" theory of Northern California?

 

A. the employment history of the most recent hire to Google Research

B. total unemployment in Oakland, California

C. the balance-sheet of a drycleaner's in Palo Alto

D. the total biomass of all the Ph.D. candidates in the Stanford Computer Science department

 

Answer: (B). (C) is clearly a "microeconomic" variable. A single drycleaner is both part of the economy, and affected by economic facts, but it's hard to see how the many fine-grained details it captures could be relevant to a coarse-grained theory. (A) is a little better, if only because it might tell us about the strategies of a major employer in the region -- but, again, many of the specific details of that most recent hire's life, fascinating as they are, are not likely to have much relevance to the economy as a whole. (D) is more of a summary than (A) and (C), so could play a role in a coarse-grained theory. But it's not a particularly good one: if everyone at Stanford CS doubled their pizza consumption, it would have an effect on the variable, but much less on variables of interest to an economist like inflation.