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The irresistible charm of the micro-foundations dogma or the overwhelming force of the discipline's hard core?

Author

Listed:
  • Thanos Skouras

    (Athens University of Economics and Business, Greece)

  • Yiannis Kitromilides

    (University of Cambridge, UK)

Abstract

The appeal of the ‘Micro-foundations’ project, which requires that all macroeconomic propositions are reduced to or derived from microeconomic ones, is strongly supported by the considerable force of what Lakatos calls the discipline's ‘hard core’. This is particularly so if this project is broadly interpreted as a way of giving precedence to microeconomics in unifying economic theory. Given the micro-theoretical nature of the ‘hard core’, questioning the Micro-foundations project is tantamount to confronting the ‘hard core.’ The paper questions the two most fundamental tenets of the ‘hard core’: maximization of utility and maximization of profit. It concludes that privileging micro over macro theory does not ensure sound foundations of the economics discipline and the Micro-foundations project makes little sense. Consequently, the search for consistency between microeconomics and macroeconomics should best be pursued in terms of a ‘bridge’ rather than a ‘foundations’ metaphor.

Suggested Citation

  • Thanos Skouras & Yiannis Kitromilides, 2014. "The irresistible charm of the micro-foundations dogma or the overwhelming force of the discipline's hard core?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(1), pages 67-79, April.
  • Handle: RePEc:elg:ejeepi:v:11:y:2014:i:1:p67-79
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    References listed on IDEAS

    as
    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 69(1), pages 99-118.
    2. George J. Stigler, 1950. "The Development of Utility Theory. II," Journal of Political Economy, University of Chicago Press, vol. 58, pages 373-373.
    3. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    4. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-577, October.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    6. Nabil Al-Najjar & Sandeep Baliga & David Besanko, 2008. "Market forces meet behavioral biases: cost misallocation and irrational pricing," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 214-237.
    7. Robin Marris, 1963. "A Model of the "Managerial" Enterprise," The Quarterly Journal of Economics, Oxford University Press, vol. 77(2), pages 185-209.
    8. T. de Scitovszky, 1943. "A Note on Profit Maximisation and its Implications," Review of Economic Studies, Oxford University Press, vol. 11(1), pages 57-60.
    9. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-1036, December.
    10. R. L. Hall & C. J. Hitch, 1939. "Price Theory And Business Behaviour," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 12-45.
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    More about this item

    Keywords

    micro-foundations; ‘hard core’; utility maximization; profit maximization; methodological individualism; fallacy of composition; ‘unity of science’; professionalization of economics;

    JEL classification:

    • A - General Economics and Teaching
    • A1 - General Economics and Teaching - - General Economics
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • B - Schools of Economic Thought and Methodology
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D - Microeconomics
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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