distinguish between microeconomics and macroeconomics

The rhetoric of microfoundations draws on an image of a macroeconomics grounded in microeconomics-anything we want to know about the economy is derivable from the analysis of individuals, taking only their tastes and the constraints of technology and resources as given. The mainstream microfoundational narrative finds virtue in deductive rigor, the unity of economics and the invariance of econometric relationships. In another summary statement, in the final section of the paper entitled “Microfoundations-Yesterday and Today” (wrongly entitled as Section 6, but it is the 7th Section) Hoover summarizes his thesis: “The term “microfoundations” dates from the mid-1950s, but the awareness of microfoundations as a methodological program explicitly present in the consciousness of the economics profession really began with Phelps’s Microeconomic Foundations and the new classical assault on Keynesian orthodoxy-especially on Keynesian macroeconometrics-around 1970. First it was a response to the creation of the sub-field of macroeconomics after 1936, but in later years a major change occurred when macroeconomists tried to introduce microeconomic foundations to macroeconomics.

The analytical and historical story of the split of economic theory between microeconomics and macroeconomics is a complicated one. The birth of macroeconomics after the 1936 General Theory, adopting a non-micro perspective for the analysis of whole economies in what was a clear break from what had occurred up to that point, was largely reversed by the end of the twentieth century. Some NCM tendencies were more radical in adopting a micro perspective in the analysis of the whole economy, some were less, particularly concerning macro policies.

Essentially, NCM turned macroeconomics into microeconomics again in more than one way.

A focal tenet was the method of New Classical Macroeconomics, emphasizing its exceptionality in the history of economics: The method was not only very different from the ‘old’ macroeconomics during the post-WWII era, as intended by its originators, but it also led toward a paradigmatic change in macroeconomics since it underlined microeconomics doctrines in the analysis of the macroeconomy. The views of the various tendencies within NCM regarding macro policy were diverse-particularly dissimilar were the New Keynesians-but they all shared a common theoretical conceptualization. The gradual rise of New Classical Macroeconomics (NCM) starting in the mid-1970s, instituted it as the hegemonic position in macro theory and significantly, in macro policy making, before the end of the millennium.

Distinguish between microeconomics and macroeconomics