Microfoundations and the Ontology of Macroeconomics

Abstract:     
"Microfoundations for macroeconomics" has become the ideological banner of macroeconomics since the 1970s. While often associated with methodological individualism, the paper argues that the true impetus is ontological - a fear that economics that does link aggregate behavior tightly to individual optimization trades in fictional entities, which cannot be understood economically. Taking John Searle's analysis of collective intentionality, the paper argues that this fear is misplaced. Macroeconomic aggregates arise from individuals, and their behavior is conditioned by the fact that the underlying agents are intentional, and yet they exist independently of any particular individual and enter into causal relations in which the intentions of individuals are, at best, background information that does not fundamentally contribute to successful explanation.

Keywords: macroeconomics, microfoundations, ontology, methodological individualism, methodology, John Searle, collective intentionality, emergence, reductionism, supervenience, social reality

JEL Classifications: B4

Working Paper Series