Yoshinori Shiozawa summarizes: “What is now necessary is not to criticize the Lucas critique more than 40 years later. It is useless to criticize microfoundations of New Classical or New Keynesian macroeconomic models. They are efforts in vain. As the old dictum put it, it takes a theory to beat a theory. What we really need is to build true microfoundations for our heterodox macroeconomic theories.”
Or, as Blaug put it: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.”
Economists know quite well that microfoundations are dead. Ingrao et al. concluded back in 1990: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.”
What it means is that economics has to move from microfoundations to macrofoundations. This is called a Paradigm Shift. To replace the Walrasian microfoundations with other microfoundations does NOT work. Methodologically, NO way leads from the second-guessing of Human Nature/motives/behavior/action to the understanding of how the economic system works. ALL microfounded/behavioral approaches inevitably fail at the Fallacy-of-Composition hurdle.
What has to be done is to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.
► Get it econ suckers: behavioral microfoundations ⇒ false, systemic macrofoundations ⇒ true
► Where economics went wrong (I)
► Where economics went wrong (II)
► Where modern macroeconomics went wrong
► Modern macro moronism
► Macroeconomics: Drain the scientific swamp
► Macro of and for the scientifically blind and deaf
► Funny folks in the big omnibus
► Macroeconomics and the fake History of Economic Thought
► Rethinking macro
► The new macroeconomic paradigm
► From false microfoundations to true macrofoundations (II)
► True macrofoundations: the reset of economics
► Show first your economic axioms or get out of the discussion
► The canonical macroeconomic model
► For more details of the big picture see cross-references Axiomatization and cross-references Paradigm Shift
Related 'The future of economics: why you will probably not be admitted to it, and why this is a good thing' and 'How to restart economics'.
For more about microfoundations see AXECquery.