Price rigidities of all kinds are common in real economies. The nodal point in the macroeconomics, however, is not their existence, but rather that even if they did not exist, our economies would not turn into the kind of Panglossian full employment equilibrium Walt-Disney-fiction-world that neoclassical macroeconomists seems to take more or less for granted....Lars P. Syll's Blog
Neoclassical “Walt Disney” economics
Lars P. Syll | Professor, Malmo University
My comment there:
Representative agent modeling is based on methodological atomism, which treats individuals as atoms in a physical system. This is overly simplistic in biological and social systems, which are complex adaptive systems rather than mechanical. Such modeling can never serve as anything more than a simple heuristic device.
Modeling based on the assumption of a representational rational agent pursuing maximum utility involves the further assumption of Bentham’s hedonistic utility theory based on a calculus of “utility” defined as material satisfaction. J. S. Mill pointed out the insufficiency of that stance in Utilitarianism: “It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, are of a different opinion, it is because they only know their own side of the question.”
See The Romantic Economist: Imagination in Economics by Richard Bronk, London School of Economics and Political Science, published by Cambridge University