Mesoeconomics: Missing Link, or Needless Pedantry?

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Mesoeconomics: Missing Link, or Needless Pedantry?

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Everyone’s heard of micro- and macroeconomics. The two terms are so deeply ingrained in the world of economics that even lay people generally know what they refer to. Almost everything economists analyze can be arguably given one of these labels.

Microeconomics is generally concerned with the optimal decision-making of individual economic actors, while macroeconomics considers the behavior of economies and economic data from a bird’s-eye view.

But what if these two labels aren’t sufficient to encompass all of economics? Are economists missing something by failing to think outside of these “big or small” labels?

That’s the question asked and answered by the term “mesoeconomics”, which purports to be the crucially important in-between that the field of economics has been missing. This term has been around for some time (it was first coined in 1986 by economist Yew-Kwang Ng) but has yet to become very popular among mainstream economists.

That may be because there hasn’t been enough attention on the term to produce a significant body of research for it yet. Or, it could be because it’s a distinction that is simply not necessary to have within the field of economics. This article will dive into both sides of the argument, helping you make your own informed opinion.

Will mesoeconomics become the next exciting new sub-field, like game theory, behavioral economics, and others before them – or is it overly pedantic? Before discussing the potential pros and cons of popularizing this new label, let’s first define it.

Defining mesoeconomics

Mesoeconomics is often defined as “the intermediary between micro- and macro-economics”, but this definition is quite lacking, as it does not explain what, exactly, is in between.

Where “micro” is concerned with an individual economic agent’s decision-making, and “macro” is concerned with larger-scale economic behavior, mesoeconomics studies how society’s institutions – made up of individuals – interact based on the incentives that they face.

As such, two existing sub-fields of economics can already be considered mesoeconomic; regional economics (often considered macroeconomics) and industrial organization (often considered microeconomics). To learn more about mesoeconomics, let’s take a deeper look at some arguments for re-labeling these topics.

Village from above.

Image credit: Pixabay.

Supporters of the mesoeconomics label would argue that the focus of regional economics is not the same as true macroeconomics. That’s partly because regional economics studies the regional policies and systems that shape a region’s economic performance. Meanwhile, macroeconomic studies typically study economic performance at large, and may not always consider the variations in regional policies making up the overall economic performance. “Mesoeconomists” would argue that regional economics tackles an “in-between” area, where systems are larger-scope than with individual decision-making (micro) but still more detailed than with studying larger economic phenomena which may not need to take into account the nuance of specific individual policies (macro).

Industrial organization extends the “theory of the firm”, studying how firms interact and form markets. This is generally considered a microeconomics endeavor, because the basic unit of analysis is the individual firm. Mesoeconomists, however, would claim that industrial organization stretches into the study of an ecosystem of firms that create industries and form markets, and can treat markets or industries as their own entity within the context of such study. This takes it a level above microeconomics – but not quite at the massive, national or global economy-wide scale of macroeconomics.

Besides these examples, one of the major focuses of mesoeconomics is economic policy. There are myriad policies – and nuances to how they’re implemented – that can cause large shifts in expected behavior in industries and markets. Therefore, understanding how industries operate and how they’re intertwined is crucial to designing effective policies! Mesoeconomics aims to draw attention to this (arguably) neglected area, raising the bar for economics as a whole.

If this sounds like an excellent idea to you, you’re in good company. It’s time to discuss the pros of popularizing the mesoeconomics label.

Pros of mesoeconomics


Image credit: Pixabay.

Were mesoeconomics to become more “mainstream”, such that economics students began to take “Mesoeconomics 101” alongside their micro and macro courses, discourse about economics would undoubtedly shift. Arguably, this would be for the better.

First, more explicit attention to the practical side of how economists’ recommendations actually play out in the real world is certainly a good thing. This increased attention to translatability could earn economists some credit in the post-financial crisis and post-COVID world, where the failures of professional macroeconomists to predict economic ails have been noted by the public.

At best, this mesoeconomic focus could help economists study and identify future man-made crises in the first place (like the 2008 financial crisis, which precious few saw coming). And, it could drive more economics research towards practical applications of policy, perhaps leading to even better policy recommendations that get taken more seriously by politicians.

Finally, if “meso” was seen as a third sibling to micro- and macroeconomics, universities and researchers would experience a rapid increase in attention being given to these practical concerns. This could serve to further legitimize the field of economics in the eyes of the public. And, it would likely lead economists further away from the “white room” theorizing problem that has been a consistent critique of the discipline.

In writing, “white room syndrome” refers to a scene that lacks enough description to help readers picture the “reality” – an example is a string of dialogue without any references to the surroundings. Similarly, economic ideas are often criticized for resting on unrealistic assumptions that lack real-world grounding, many times even by the economist who came up with the idea! For instance, Alfred Marshall formalized many classic microeconomics concepts, but he recognized their limitations and encouraged his students to surpass his work.

Empty room.

Image credit: Pixabay.

Maybe introducing mesoeconomics would make Marshall proud of his intellectual descendants – or maybe, he would simply argue that it doesn’t represent a new innovation so much as needless jargon.

Cons of mesoeconomics

One of the greatest arguments to make against the need for mesoeconomics is that it doesn’t actually do anything new. Attempting to further sub-divide the field of economics into more labels arguably does not produce new ideas, and may be overly pedantic. Further, this third label may simply confuse laypeople, policymakers, and new economics students without generating meaningfully new discussions.

Even though mesoeconomics purports to study industries and the economy from a middle-level view, one might argue that economists already do this routinely throughout their work. For instance, policy recommendations are very often made after studying the local, regional, or national situation. And, middle-level institutions (like state governments) are perfectly capable of hiring economists to help them. Whether we call it mesoeconomics or not, the work is already being done.

Further, even from a theoretical standpoint, one could argue that an increased focus on the “middle” between micro- and macroeconomics is both poorly defined and not necessary. At what point does something cease to be a microeconomics analysis, but not yet become a macroeconomics one?

Micro- and macro-analyses aren’t neatly defined by the geographical area studied; rather, they use quite different mathematical and statistical tools to analyze data and answer specific questions. For example, microeconomic techniques can easily be used to study the behavior of international trade, if each country is viewed as an individual economic agent that must optimize its trade balance. Similarly, macroeconomic techniques can be applied to small areas to test macroeconomic theories. The geographical scale doesn’t define the discipline; the theories and analyses utilized do. So, to carve a well-defined space for itself, mesoeconomics must have a well-defined set of theories and techniques that are unique enough to be recognizably different.

Finally, the label “mesoeconomics” was coined in 1986, nearly forty years ago at the time of this writing. But the term is still very niche – many economics students never hear the word during their entire Master’s or PhD programs, the news rarely if ever mentions it, and research papers seldom use the term.

A quick search of the term “mesoeconomics” on RePEc’s EconPapers database returns only 241 results total, and only 10 that have been updated or published within the last year. This heavily suggests that economists have not needed to adopt the term, simply because it isn’t very useful.

What do you think? Will mesoeconomics take off and become its own respected area of economics, or remain doomed to niche arguments in small corners of the field? Feel free to share your take in the comments below.

Header image credit: Pixabay.
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