John E. King: Microfoundations?

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Microfoundations?

21 pp.
3.70 EUR
(October 2009)

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In the opening chapter “Microfoundations?”, John E. King claims that the dogma that macroeconomic theory must have microeconomic foundations is accepted by almost all mainstream economists, and by a surprisingly large minority of heterodox theorists. He argues that it is wrong, and that it has the potential to do considerable damage to Post-Keynesian economics. Since the microfoundations dogma is an instance of the principle of inter-theoretic reduction, King begins by discussing some recent work in the philosophy of science that has been severely critical of reductionism. He then assesses the implications for macroeconomic theory of the related principle of methodological individualism, which proves to be much less supportive of the case for microfoundations than its adherents suppose. Next he considers the argument that microeconomic theory needs macroeconomic foundations, with which he has some sympathy. He concludes, however, that foundational metaphors in economics should be treated with great care. Both microeconomic and macroeconomic theory need clear social and philosophical foundations, but there is no good reason why macroeconomics requires microeconomic foundations, or indeed why microeconomic theory must be provided with macroeconomic foundations.

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