Idealizing Reduction: The Microfoundations of Macroeconomics

Published

Journal Article

The dominant view among macroeconomists is that macroeconomics reduces to microeconomics, both in the sense that all macroeconomic phenomena arise out of microeconomic phenomena and in the sense that macroeconomic theory-to the extent that it is correct-can be derived from microeconomic theory. More than that, the dominant view believes that macroeconomics should in practice use the reduced microeconomic theory: this is the program of microfoundations for macroeconomics to which the vast majority of macroeconomists adhere. The "microfoundational" models that they actually employ are, however, characterized by another feature: they are highly idealized, even when they are applied as direct characterizations of actual data, which itself consists of macroeconomic aggregates. This paper explores the interrelationship between reductionism and idealization in the microfoundational program and the role of idealization in empirical modeling. © 2010 The Author(s).

Full Text

Duke Authors

Cited Authors

  • Hoover, KD

Published Date

  • November 1, 2010

Published In

Volume / Issue

  • 73 / 3

Start / End Page

  • 329 - 347

Electronic International Standard Serial Number (EISSN)

  • 1572-8420

International Standard Serial Number (ISSN)

  • 0165-0106

Digital Object Identifier (DOI)

  • 10.1007/s10670-010-9235-1

Citation Source

  • Scopus