On how to do microfoundations right: Atif Mian: In Conver...

On how to do microfoundations right: Atif Mian: In Conversation with Heather Boushey: "Our number of theories is much larger than the number of observations we have, which is a limiting factor of macroeconomics just from an empirical standpoint.... This is where I feel micro data comes in.... Let me just give you one quick example.... The 2000s... you see credit going up, you see aggregate income going up as well.... If it were higher incomes that were driving credit growth, then since income growth is concentrated in the top 1 percent, we should really expect the top 1 percent to borrow a lot more.... Yet that clearly was not the case. So, even a basic breakdown of the data along a more micro level starts to give you a lot more insights than you might be able to deduce from just looking at the macro aggregates...

#noted