Aggregation Theory and the Ideal Price Deflator: A Note
In this paper, a proof is provided for the proposition that collapsing a three period model into a two period model with the use of aggregation theory does not permit the analysis of price changes in the two periods that are aggregated. An unknown implication of this proposition is also brought forth by our analysis. The main instrument in the proof is the differentiation of a little known result from aggregation theory. Since the analysis is equally applicable to three commodities and easily extended to n periods or commodities, it casts doubt on the usefulness of aggregation theory in a variety of economic contexts.