Why did Lucas emphasize microfoundations in macroeconomics?
I believed that macroeconomic models needed to be built on solid microeconomic foundations, meaning they should be derived from the optimizing behavior of individual households and firms. Aggregate phenomena should emerge from the choices made by these individual units. This approach, often referred to as 'microfoundations,' was crucial for understanding the effects of policy changes. Without this grounding, observed empirical regularities could be spurious and policy advice based on them unreliable. The Lucas Critique directly addresses this.
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