tag:blogger.com,1999:blog-2546602206734889307.post8959624252658666278..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Relearning old ideas in macroeconomics after the New Classical Counter RevolutionMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2546602206734889307.post-53407228707817914172021-08-03T16:39:36.817+00:002021-08-03T16:39:36.817+00:00I agree with what you've written in this post,...I agree with what you've written in this post, but there's an additional issue: "microfounded" models are not actually microfounded, and it matters a lot. These models all work with representative agents, including those with heterogeneous agents. They don't actually derive macro relationships from the plethora of individual decisions that a true microfounded approach would need to model. Of course, that would be impossible; there are too many decision-makers and too little understanding of how they respond to their changing environments. But worse, what is really distinctive about macroeconomics derives from exactly that complexity. The choice of the "old" macro to abstract from the individual level and work with aggregate patterns at least allows for the effects of that complexity to be studied; microfounded macro doesn't unless it's reverse engineered to have ad hoc features that generate them.<br /><br />The closest we come at the moment to true microfoundations is agent-based modeling, but this remains highly stylized and not terribly useful for policy work, as far as I know.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.com