Whither the Microeconomic Foundations of Macroeconomic Theory ?
The debate on the future of macroeconomic theory is in full swing. Uneasiness about mainstream macroeconomics, and more in particular the ubiquitous DSGE line of research, could already be heard in some circles well before the Credit Crunch and the ensuing economic crisis. This paper argues that the present-day strand of micro-foundations of macroeconomics are the main source of failure of the latter. In section 1 we trace back the history of the call for micro-foundations. Section 2 examines these micro-foundations in more detail. Section 3 deals with the economic crisis and the crisis in (macro)economic theory. In section 4 we try to identify possible alternative approaches and paradigms. We conclude in section 5.
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