Wednesday, September 14, 2011
Microeconomists off the hook (maybe) (by Pedja dell'Arno)
Paul Krugman delivered a speech at the Eastern Economic Association where he reflected on the role of economists in the current crisis. He said "maybe I can let microeconomists off the hook. But macroeconomics is, above all, about understanding and preventing or at least mitigating economic downturns". I wonder if that is true. I mean, it is probably true about macroeconomists, but micro people should perhaps also share at least part of the blame, since modern macro, if I am not mistaken, has been based on microfoundations. Perhaps these microfoundations were not that sound after all. If the microfoundations of macro have been based only on the micro of 30 years ago, before the irruption of behavioral, institutional and evolutionary economics, probably they lack some of the most interesting issues that microeconomics has to say. Still, even with the recent contributions, microeconomics is just a methodological guide to ask scientific questions about social reality, who knows if rich and sophisticated enough to help answer the big questions of our time.