Time for Microeconomics

Tim Worstall:

Macroeconomics, the study of, among other things, demand, investment, equilibrium at the level of the whole economy and so on is, if you believe most macroeconomists, the only important thing about the whiole science of economics. And I would argue that that’s entirely the wrong way around.
. . .
But once you’ve got to the production frontier this no longer works. You need to be working out new ways of doing new things, not just doing more or better of the old. The lessons on how to do this being what microeconomics is in large part about: it’s nothing to do with aggregate demand or the other things that the macroeconomists worry about.

Which is why, in the long term it’s all microeconomics. The plain old basics: incentives, prices, flexibility, rule of law and so on. Whatever macro tells us, the secrets of long term economic growth are still rooted in micro.



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