Wednesday, February 2, 2011

Neologism Watch: Mesoeconomics

The field of microeconomics deals with buyers and sellers, while macroeconomics studies aggregate supply and demand. But what about economic activity between levels? 'Mesoeconomics' seems to be a vaguely-defined, catch-all term for the analysis of structures lying in this middle-ground.

There appears to be much confusion about which economics sub-fields fall within mesoeconomics. Game theory is often categorized as mesoeconomic, yet economics can no more claim game theory as its own than it can statistics or differential calculus; these are methods, and by convention academic disciplines are defined by the topic of study, not the tool.

Two fields that fit my conception of mesoeconomics are organizational economics and urban economics. Although concerned with different things (firms and location, respectively), both share the interesting quality of studying the threshold between individual actors and collective market action. Let me explain.

Organizational economics studies the threshold between firms and markets: why does some economic activity occur within a firm, and some occur between firms, in markets? Similarly, urban economics studies the threshold of urban agglomerations: why do some firms choose to locate within a city, while others don't? Why do some cities grow, and others shrink? These 'threshold' questions, tackling mechanisms through which small translates into large, are at the core of mesoeconomics.

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