This post has brilliantly articulated a crucial idea. Thank you!
Microfoundations for macroeconomics is a step in the right direction towards a gears-level understanding of economics. Still, our current understanding of cognition and human nature is primarily based on externally-visible behaviour and not on gears. Do you think we are progressing in the right direction within microeconomics towards more gears-level agent models?
I read the arguments against microfoundations, and some opponents point to “feedback loops”. They claim that the arrow of causation is bidirectional between agent behaviour and macroeconomics. For example, agents anticipating an interest rate increase change how they behave. Curious to know what you think about this line of argumentation.
Causation goes from the lower levels to the higher levels. E.g. we cannot choose to change the laws of physics, but the laws of physics entirely cause everything we experience. Are these “feedback loops” an illusion created by our confusion and lack of gears-level causal understanding, or are they actual gears?
This post has brilliantly articulated a crucial idea. Thank you!
Microfoundations for macroeconomics is a step in the right direction towards a gears-level understanding of economics. Still, our current understanding of cognition and human nature is primarily based on externally-visible behaviour and not on gears. Do you think we are progressing in the right direction within microeconomics towards more gears-level agent models?
I read the arguments against microfoundations, and some opponents point to “feedback loops”. They claim that the arrow of causation is bidirectional between agent behaviour and macroeconomics. For example, agents anticipating an interest rate increase change how they behave. Curious to know what you think about this line of argumentation.
Causation goes from the lower levels to the higher levels. E.g. we cannot choose to change the laws of physics, but the laws of physics entirely cause everything we experience. Are these “feedback loops” an illusion created by our confusion and lack of gears-level causal understanding, or are they actual gears?