CORE Metadata, citation and similar papers at core.ac.uk Provided by Research Papers in Economics Department of Economics- FEA/USP Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics PEDRO GARCIA DUARTE WORKING PAPER SERIES Nº 2011-02 DEPARTMENT OF ECONOMICS, FEA-USP WORKING PAPER Nº 2011-02 Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics Pedro Garcia Duarte (
[email protected]) Abstract: Macroeconomics, or the science of fluctuations in aggregate activity, has always been portrayed as a field composed of competing schools of thought and in a somewhat recurrent state of disarray. Nowadays, macroeconomists are proud to announce that a new synthesis characterizes their field: no longer are there fights and disarray, but rather convergence and progress. I want to discuss how modern macroeconomists see the emergence of such a consensus and, therefore, how they see the history of their sub-discipline. In particular, I stress the role played in the making of such a consensus by a particular understanding of the microfoundations that macroeconomics needs. Keywords: new neoclassical synthesis; microfoundations; DSGE models; consensus JEL Codes: B22; B20; E30 Not Going Away? Microfoundations in the Making of 1 a New Consensus in Macroeconomics Pedro Garcia Duarte2 Macroeconomics is now, as it has always been, the subject of intense controversy. Robert Solow (1979, 340) When the outside world tells us that no two economists ever agree on anything, it is talking about macroeconomics. Stanley Fischer (1983, 275) While macroeconomics is often thought of as a deeply divided field, with less of a shared core and correspondingly less cumulative progress than in other areas of economics, in fact, there are fewer fundamental disagreements among macroeconomists now than in the past decades.