Microfoundations, Methodological Individualism and Alternative Economic Visions

Abstract

ABSTRACTThis article analyzes the standard descriptive and prescriptive uses of the phrase ‘microfoundations of macroeconomics’ as practised since the early 1970s within the discipline of economics. From a descriptive point of view, we maintain that generally this phrase is used to mean a very specific and idiosyncratic way of conceiving the relationship between individual and collective economic behaviour. From a prescriptive point of view, we argue that the requirement for robust macroeconomics that must repose on this particular approach is unjustified and dogmatic. The rapid and widespread adherence by the most influential economists and economic institutions to this approach since the early 1970s deeply transformed macroeconomics by inhibiting the systematic pursuit of alternative approaches. We claim that this extreme form of reductionism greatly restricts the empirical scope and policy efficacy of macroeconomics. We conclude that the relationship between individual and collective economic behaviour is a crucial issue that has to be pursued without any dogmatic a priori imperatives.