This changed with the Great Depression , when aggregate variables came into play that needed a better understanding than an assumption that markets return to equilibrium after shocks. The crisis in economic modelling arises from aggregating billions of micro truths into one macro truth. Models are improving, so are quantitative capabilities, and the qualitative judgements that drive macro policy will become more refined. The spread (a subject of macro) of banking (micro explains how the industry works) reduces poverty and improves labour productivity. But with microeconomics having its foot far more visible in the game than macro with its invisible hand and other limbs, this paper will put the micro horse before the macro cart.

Source: Economic Times August 13, 2023 19:29 UTC