Simon Wren Lewis' latest post on Mainlymacro rails against what he sees as an overemphasis on microfoundations in macro models. Paul Krugman picked up this post, and it was reblogged and retweeted by Brad DeLong and probably others, referring to the notion of 'macro wars', between those who microfound, and those who don't. Simon points in particular to the failure to incorporate downward nominal rigidity in wages, and other features that spring from behavioural economics.
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There's no war now. Pragmatic…
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Simon Wren Lewis' latest post on Mainlymacro rails against what he sees as an overemphasis on microfoundations in macro models. Paul Krugman picked up this post, and it was reblogged and retweeted by Brad DeLong and probably others, referring to the notion of 'macro wars', between those who microfound, and those who don't. Simon points in particular to the failure to incorporate downward nominal rigidity in wages, and other features that spring from behavioural economics.