Microfoundations and the Ontology of Macroeconomics

Abstract The typical concerns of macroeconomics—such as national output, employment and unemployment, inflation, interest rates, and the balance of payments—are among the oldest in economics, having been dominant among the problems addressed by both the mercantilists and classical economists, such as David Hume, Adam Smith, David Ricardo, as well as even earlier writers. These concerns co-existed with ones that are now regarded as characteristically microeconomic, such as the theory of prices exemplified in the labor theory of value of the classical economists or the theory of marginal utility of the early neoclassical economists. Questions about the relationship between these two groups of concerns could hardly be articulated until a categorical distinction between macroeconomics and microeconomics had been drawn. This article asks whether there is a successful ontology of macroeconomics. It also discusses the implications that this ontology has for practical macroeconomics.