Abstract
The lack of clear connection between macroeconomics and microeconomics has long been a source of discontent among economists. Arrow (1967) called it a ‘major scandal’ that neoclassical price theory cannot account for such macroeconomic phenomena as unemployment. Lucas and Sargent (1979) argued that Keynesian macroeconomics is ‘fundamentally flawed’ by its lack of a firm microfoundation. Countless students and practitioners alike have complained of the schizophrenic nature of a discipline whose two major branches project such radically different views of the world.
This chapter was originally published in The New Palgrave: A Dictionary of Economics, 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman
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Howitt, P. (1987). Macroeconomics: Relations with Microeconomics. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_691-1
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DOI: https://doi.org/10.1057/978-1-349-95121-5_691-1
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