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Privileging Micro over Macro? A History of Conflicting Positions

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Abstract

Mainstream macroeconomists agree that we live in the age of microfoundations. The recent worldwide financial crisis may have emboldened critics of this microfoundational orthodoxy, but it remains the dominant view that macroeconomic models must go beyond supply and demand functions to the level of “deep parameters.” Microeconomics on this view is prior to macroeconomics. The standard narrative of the rise of microfoundations locates their origins in the work of Lucas and his new classical friends and followers in the 1970s. Our purpose is to step back and to reexamine the history of the relationship of microeconomics and macroeconomics without presupposing the truth of the standard narrative, challenging the association of microfoundations with Lucas and rational expectations.

Suggested Citation

  • Pedro Garcia Duarte & Gilberto Tadeu Lima, 2011. "Privileging Micro over Macro? A History of Conflicting Positions," Working Papers, Department of Economics 2011_01, University of São Paulo (FEA-USP).
  • Handle: RePEc:spa:wpaper:2011wpecon01
    Note: Published in the book "Microfoundations Reconsidered: the relationship of micro and macroeconomics in historical perspective", edited by Pedro Garcia Duarte and Gilberto Tadeu Lima (Cheltenham, UK: Edward Elgar, 2012, ch. 1, pp. 1-18)
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    Cited by:

    1. Thiago Dumont Oliveira & Carlos Eduardo Suprinyak, 2016. "Lionel Robbins’ first-step individualism and the prehistory of microfoundations," Textos para Discussão Cedeplar-UFMG 537, Cedeplar, Universidade Federal de Minas Gerais.
    2. Hugo C. W. Chu, 2015. "Lucas’ Equilibrium Account of the Business Cycle: Optimizing Behavior, General Equilibrium, and Modeling Rational Expectations," Working Papers, Department of Economics 2015_30, University of São Paulo (FEA-USP).

    More about this item

    Keywords

    microfoundations; new classical macroeconomics; Robert Lucas; new Keynesian macroeconomics; new neoclassical synthesis;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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