"Having microfoundations is better than not having them."
However, he admits that bad microfoundations is worse than none at all:
"Once again, let me reiterate that the big problem with "microfounded" macro, as I see it, is that the "microfoundations" are bad: not credible, and generally not consistent with anything microeconomists have actually found. Bad microfoundations are worse than none at all."
Peter Dorman thinks they're nice but not essential-which is very different form how it works at peer review-apparently.
"Noah Smith, Simon Wren-Lewis and Paul Krugman have already weighed in on this in different ways, but maybe the time has come to be excruciatingly blunt. Microfoundations for macroeconomics are fine in principle—not indispensable, but useful. The problem is that what passes for microfoundations in the universe of orthodox macro is crap.
"It’s nothing more than robotic imitation of teaching exercises to improve math skills, without any consideration for such mundane matters as empirical verisimilitude. I will mention three crushing faults, each sufficient by itself to blow a wide hole in a supposedly useful model."
Yet in the Post Lucas world it is treated as essential. Finally Krugman:
"We’ve been having an ongoing discussion of the “microfoundations for macroeconomics” issue; follow the links from this piece by Peter Dorman to get up to speed. Basically, macroeconomics has long been dominated, and I’d say crippled, by the determination to ground macro analysis in the behavior of perfectly rational individuals."
"The thing is, this determination starts from the presumption that standard microeconomics, which assumes such perfect rationality, is actually right. And of course it isn’t."
"Oh, and the notion that macro is rotten but micro is in good shape is, well, only half right."
I love it. The seeds of another Stephen Williamson Krugman bashing post. Noah sees the importance for microfoundations or at least explains it in terms of his previous experience as a physics major. So he sees microfoundations as being something beneficial for scientific investigation in general. Basically microfoundations for him seems to be tied up with good scientific method.
Yet it seems to me to play Devil's Advocate that "microfoundations" at least in economics is necessarily a "a gun that fires only left" as a commentator on Noah's post argued. Noah believes that the Lucas Critique is valid:
"The Lucas Critique is simple, and it is correct. If you have a model of the economy that works pretty well, and you try to use that model to predict the effects of a new policy, the policy may change people's behavior so that your model no longer works pretty well, thus leading (among other things) to the policy failing to have its intended effect."
Historically speaking, though, recall that macroeconomics itself is by definition Keynesian. Prior to Keynes there was no Macro only microeconomics. You could therefore argue, in this sense, that Macro is Keynesian while Micro is pre-Keynesian.
So could it be argued that what the Lucas Critique amounts to is that any Keynesian premises or claims are constrained to pass muster by pre-Keynesian standards to be even given a seat at the table?