Simon Wren Lewis who is a professor of economics at Oxford University has an interesting piece (hat tip: Mark Thoma) on the distinction and choice between micro founded macroeconomic models and top-down models such as the IS/LM (Keynesian) or other variants such as Modern Monetary Theory (MMT).
I think this is an interesting discussion and I have penned my own thoughts on microfoundations in macroeconomics here. Mr Lewis is balanced but seems to be on Paul Krugman's side (by and large) who has been devastating in his critique of modern macroeconomics especially in the wake of the financial crisis. For good order, my own views are summarized in the following snippet.
Two obvious questions impose themselves at this point. One is whether the use of representative agents in macroeconomics has something, in general, to do with the recent soul searching among macroeconomists and the critique against the profession. And the second is whether the study of macroeconomics and demographics in particular calls for the non-use of representative agent modelling.
On the first I don't necessarily think that it exists to the detriment of macroeconomics as a discipline, but I do think that a couple of points need mention. First of all I will echo the point made in Hartley (1997) that given the widespread use of representative agent modelling in almost all corners of macroeconomics and the almost religious devotion to it in graduate and PhD economics I think it is highly problematic that we have not had a more serious debate of its methodological merits. I would emphasize this in particular in the context of the fact that the use of representative agents leads to very inflexible (although rigorous) mathematical models and the blind faith in these models tend to steer macroeconomics onto a very narrow methodological path. During my research and initial ground work for the thesis I actually did write my own representative agent model to suit my specific agenda, but found in the end that I was paying more tribute to the laws of calculus than the connection between ageing and capital flows/open economy dynamics and as I set up the problem I ended up very close to the original benchmark problem.
Read it at Kostas Georgioy European Crisis NewsNothing New In Macroeconomic Methodology? (Wonkish)
by Kostas Georgioy
(h/t Scott Fullwiler via Twitter)