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Philip Cross: A Nobel Prize in economics for flawed foundations

Trying to found hoary macroeconomic relationships in sound microeconomic theory is an honourable pursuit but not easy to achieve

Earlier this month, American economists Robert Hall and Michael Woodford won the Nobel Prize in economics for their work on the “microeconomic foundations of macroeconomic stabilization.” The two do deserve a Nobel, but not for their work on the micro foundations of macro. The idea that macroeconomics could be based on analyzing and aggregating individual behaviour was doomed to fail. The global financial crisis of 2008-9 left no doubt about that. It is a mystery why the Nobel committee overlooked that failure.

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