Aggregation

Aggregation is a major problem in economics. Taleb in The Bed of Procrustes (2010) summarizes the central problem: “we humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas”. Economic theory deals with aggregates, such as the demand across consumers for a product (microeconomics), or total consumption in a national economy (macroeconomics). However, on further examination, there are vast numbers of products, consumers and firms in a complex dynamic network underlying these aggregates. The National Accounts brings order to the data, but inevitably they omit hard-to-measure or immeasurable aspects of human, animal and ecosystem well being.

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