Microfoundational Programs

Kevin Hoover
Publication Number: 

The substantial questions of macroeconomics itself are very old, going back to the origins of economics itself.  

But professional self-consciousness of the distinction between macroeconomics and microeconomics dates only 

to the 1930s.  The distinction was drawn quite independently of Keynes, yet Keynes’s General Theory led to its 

widespread adoption.  The question of the relationship of microeconomics to macroeconomics encapsulated in 

the question of whether macroeconomics requires microfoundations was not raised for the first time in the 

1960s or ‘70s, as is sometimes thought, but goes back to the very foundations of macroeconomics.  There are in 

fact at least three microfoundational programs:  a Marshallian program with its roots directly in Keynes’s own 

theorizing in the General Theory; a fixed-price general-equilibrium theory, which includes some work of 

Patinkin, Clower, and Barro and Grossman; and the more recent representative-agent microfoundations, starting 

with Lucas and the new classicals in the early 1970s.  This paper will document the development of each of 

these microfoundational programs and their interrelationship, especially in relationship to the programs of 

general-equilibrium theory and econometrics, whose modern incarnations both date from exactly the same 

period in the 1930s.