The Macrofoundations of Micro

This paper argues that there are two contending visions of macroeconomics: the micro vision--in which macroeconomics results are just the combination of results of atomistic individuals, and the macro vision--in which the interaction of atomistic individuals leads to such complexity that the aggregate results cannot be rationally deduced from the analysis of individual atomistic individuals. Using a macro vision, the economy cannot be analyzed contextually taking into account the constraints imposed on individuals by the macro institutions necessary to coordinate individuals behavior sufficiently so that markets can work. This macro foundation to micro approach offers a serious challenge to New Classical economics that other approaches to Keynesian macro do not.