Why Are “Microfoundations” Irrelevant? An Argument for Reorienting the Debate

Microfoundations have long been the subject of a methodological debate over how microeconomic and macroeconomic analysis are understood to relate to one another. Despite once being an important debate with profound consequences for how economics was practiced, changes in macroeconomics over the past 40 years have made the debate vestigial and irrelevant for understanding, justifying, and criticizing modern mainstream macroeconomics. Specifically, macroeconomics has undergone a methodological convergence, making it methodologically indistinguishable from microeconomic analysis. For this reason, the debate should be reoriented away from “microfoundations” and toward issues which are currently salient: aggregation and heterogeneity.