Economistry

Yglesias:

[E]conomists have unearthed an extremely fruitful paradigm for investigation of micro issues. This has been good for them, and enhanced the prestige of the discipline. No such fruitful paradigm has actually emerged for investigation of macro issues. So the decision has been made to somewhat arbitrarily impose the view that macro models must be grounded in micro foundations. Thus, the productive progressive research program of microeconomics can “infect” the more troubled field of macro with its prestige.

Which, as a sociological matter, I think you’d have to say has worked.

But as a methodological matter, it seems deeply unsound. As a general principle for investigating the world, we normally deem it desirable, but not at all necessary, that researchers exploring a particular field of inquiry find ways to “reduce” what they’re doing to a lower level. To make that concrete, in the modern day we have achieved a decent understanding of how principles of chemistry are grounded in physics’ understanding of the behavior of atoms. But it’s just not the case that advances in chemistry were made by demanding that chemists ground all their models in subatomic physics. On the contrary, chemistry moved forward in the first instance by having chemists investigate issues in chemistry and see which models and theories held up. Similarly, though psychology is intertwined with the detailed study of the biology of the brain, it’s not deemed illegitimate to research psychological issues in the absence of a specific neurological theory. Nor, for that matter, do microeconomists generally deem it necessary to explore in detail the psychological foundations of their models. The models are, rather, judged by whether or not they produce fruitful insights about economics. Trying to enhance models with better information about psychology isn’t against the rules, but it’s not required either. What’s required is that the models do useful work.

So why should it be that “in the current regime, if [macro models] are not meticulously constructed from “micro foundations,” they aren’t allowed to be considered”?

Yes.

Part of the problem is that macro data is so hard to gather (hint: I have an idea for doing something about this problem). Countries are very different from each other. Most haven't been growing steadily for very long. There are many government policies that complicate things. Data quality is poor. And there's the ergodicity problem (history may not repeat itself). So macro models that tried to predict the overall performance of the economy tend to have a pretty short shelf-life in terms of their effectiveness (compare this to the laws of physics, which never change). Microfounded math-wanking, as an alternative, may not be useful to society, but it doesn't set you up for massive failure.

But let's not forget that part of the problem is political. Microfounded models are very hard to solve - so hard, in fact, that for a long time he only really solvable ones were "RBC" models, in which people are perfectly rational, government has no role, markets work smoothly, etc. So while "neo-Keynesians" were struggling like crazy to construct much harder, slightly more realistic micrfounded models, the politically conservative "RBC" theorists were first past the post. The fact that their model was junk didn't hurt them; at least, not until the economy massively crashed and burned twenty-five years later. By then, Ed Prescott had made off with his Nobel Prize.