The Microfoundations Delusion

The Microfoundations Delusion

Metaphor and Dogma in the History of Macroeconomics

J. E. King

In this challenging book, John King makes a sustained and comprehensive attack on the dogma that macroeconomic theory must have ‘rigorous microfoundations’. He draws on both the philosophy of science and the history of economic thought to demonstrate the dangers of foundational metaphors and the defects of micro-reduction as a methodological principle. Strong criticism of the microfoundations dogma is documented in great detail, from some mainstream and many heterodox economists and also from economic methodologists, social theorists and evolutionary biologists. The author argues for the relative autonomy of macroeconomics as a distinct ‘special science’, cooperating with but most definitely not reducible to microeconomics.

Chapter 9: The dissenters, part II: mainstreamers, Austrians and institutionalists

J. E. King

Subjects: economics and finance, history of economic thought, post-keynesian economics


9.1 INTRODUCTION As we saw in Chapters 5–6, there have always been economists who have doubted the microfoundations dogma. In Chapter 8 the opposition of many Post Keynesians was documented. In this chapter I distinguish three further categories of dissidents: mainstream economists, usually but not invariably of an Old Keynesian disposition, and Austrians and institutionalists from the heterodox camp. They are a very motley crew. As will become apparent in Section 9.2, the mainstream dissenters are united by a broad sympathy for Keynes, but not by very much else. One might expect the Austrians to be strong supporters of microfoundations on explicitly methodological grounds, since methodological individualism has always been a core Austrian principle. But they are also strongly opposed to neoclassical models of profit and utility maximization, and in practice, Austrian macroeconomics reveals clear pre-Keynesian (Wicksellian) roots. This is a complicated story, which is told in Section 9.3. The institutionalists are the subject of Section 9.4. While they tend to draw their macroeconomics, such as it is, from the Post Keynesians, the institutionalists also have some distinctive ideas on the relations between the social and the individual, and on the emergence of social properties, which are directly relevant to the relationship between micro and macroeconomic theory. In Section 9.5 I draw some general conclusions about the nature of dissent from the microfoundations dogma. 9.2 MAINSTREAM DISSENTERS Support for the microfoundations dogma was pretty well unanimous among New Classical economists, and there was very substantial agreement too among...

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