There’s been a few good posts on microfoundations in macro over the past couple of days:
as well as:
“More Microfoundations Madness!
1a) Simon Wren-Lewis has more thoughts on microfoundations and when they have proven useful in the past.
1b) Angus of Kids Prefer Cheese says that current models basically give you the choice between using crappy microfoundations (RBC) or incomplete microfoundations (New Keynesian models). Peter Dorman I pretty much agree with all of these posts.
1c) Peter Dorman points out that even if you have good microfoundations, aggregation poses a daunting problem for macro models. Richard Serlin makes similar points.
1d) Peter Dorman and Andrew Gelman are even more critical of existing micro models than I am.”
& concludes: Did the Krugman insurgency fail?