New Lecture: Gorman Aggregation with Heterogeneous Households
28 Dec 2025
We’re pleased to announce a new lecture on Advanced Quantitative Economics with Python: Gorman Aggregation with Heterogeneous Households.
About the Lecture
This lecture explores one of the fundamental questions in macroeconomic theory: under what conditions can an economy with diverse households be analyzed as if there were a single representative consumer?
Key topics covered include:
- Gorman aggregation conditions: When household demand can be aggregated regardless of income distribution
- Linear Engel curves: The role of quasi-homothetic preferences in enabling aggregation
- Practical implications: Understanding when representative agent models are appropriate approximations
Why This Matters
Representative agent models are ubiquitous in macroeconomics, but their validity depends on specific conditions that aren’t always met. This lecture provides the theoretical foundations for understanding:
- When aggregation is justified
- What heterogeneity matters for aggregate outcomes
- How to think about distributional effects in macro models
The lecture includes computational examples and exercises to reinforce the theoretical concepts.
Contributors
This lecture was developed by Humphrey Yang and Thomas Sargent.
Published by: QuantEcon