15 April 2020

Microeconomic Foundations Of Macroeconomics?

# Neo-classical microeconomics looks at economic agents - by assuming them to be rational maximisers.
# Keynes gave birth to macroeconomics which looks at the aggregate economy independently - ie, without bothering about microeconomics.
# Neo-classicists attacked Keynesian macroeconomics - saying it does not have 'solid microeconomic foundations'.
# Neo-Keynesians are responding by building the 'solid microeconomic foundations' for Keynesian macroeconomics.
# But all this is funny when the foundation of microeconomics (rational maximisation) is itself being broken - by behavioural economics.

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