Idealizing Reduction: The Microfoundations of Macroeconomics
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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).
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Professor Hoover's research interests include macroeconomics, monetary economics, the history of economics, and the philosophy and methodology of empirical economics. His recent work in economics has focused on the application of causal search methodologies for structural vector autoregression, the history of microfoundational programs in macroeconomics, and Roy Harrod's early work on dynamic macroeconomics. In philosophy, he has concentrated on issues related to causality, especially in economics, and on reductionism -- the philosophical counterpart to microfoundations. Recent publications include:
- "Trygve Haavelmo's Experimental Methodology and Scenario Analysis in a Cointegrated Vector Autoregression" (Econometric Theory, 2015),
- "Reductionism in Economics: Intentionality and Eschatological Justification in the Microfoundations of Macroeconomics" (Philosophy of Science 2015),
- "Mathematical Economics Comes to America: Charles S. Peirce’s Engagement with Cournot’s Recherches sur les Principes Mathematiques de la Théorie des Richesses" (Journal of the History of Economic Thought, 2015),
- "The Genesis of Samuelson and Solow’s Price-Inflation Phillips Curve" (History of Economics Review, 2015),
- "Solow's Harrod: Transforming Cyclical Dynamics into a Model of Long-run Growth" (European Journal of the History of Economic Thought 2015),
- "In the Kingdom of Solovia: The Rise of Growth Economics at MIT, 1956-1970" (History of Political Economy 2014),
- “Still Puzzling: Evaluating the Price Puzzle in an Empirically Identified Structural Vector Autoregression” (Empirical Economics, 2014),
- "On the Reception of Haavelmo's Econometric Thought" (Journal of the History of Economic Thought, 2014) – winner of the History of Economics Society Best Paper Award in 2015.
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