Cambridge Journal of Economics 2014, 38, 797–815 doi:10.1093/cje/bet071 Advance Access publication 26 December 2013 © The Author 2013. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved. Aggregate structural macroeconomic analysis: a reconsideration and defence Mark Setterield and Shyam Gouri Suresh* Aggregate structural macroeconomic analysis (ASMA) is frequently criticised for being ad hoc and justiied (if at all) only as a pragmatic expedient. This paper argues instead that ASMA is consistent with the principles of well-established bodies of social theory. Appeal to these principles reveals that ASMA is adequate and likely even necessary for the successful prosecution of macroeconomic inquiry. Key words: Macroeconomics, Microfoundations, Macrofoundations, Aggregate structural relations JEL classiications: B22, B41 1. Introduction According to mainstream economic thought, the determinants of all economic outcomes are to be sought and found at the level of the individual decision maker. In macroeco- nomics this thinking has found expression in the ‘microfoundations of macroeconomics’ project. The microfoundations project is central to the ‘consensus view’ of macroeco- nomics enshrined in contemporary dynamic stochastic general equilibrium (DSGE) models, as celebrated by authors such as Blanchard (2009) and Woodford (2009). 1 At its core, the microfoundations project is a reaction against aggregate structural macroeconomic analysis (ASMA), which seeks to explain aggregate (i.e. economy- wide) economic outcomes in terms of analysis based on aggregate (i.e. external to the individual) structural and behavioural relations. The microfoundations project deems ASMA an inadequate basis for explaining macroeconomic outcomes, because it does not involve explicit description of the intentions and actions of the individual decision makers of which the economy as a whole is undoubtedly comprised. ASMA is not without its advocates, even amongst prominent mainstream econo- mists. Hence, Romer (1996) acknowledges that ASMA is ‘externally consistent’ in the Manuscript received 20 August 2012; inal version received 18 September 2013. Address for correspondence: Department of Economics, Trinity College, Hartford, CT 06106, USA; email: mark.setterield@trincoll.edu * Trinity College (MS) and Davidson College, NC, USA (SGS). An earlier version of this paper was pre- sented at the Non-equilibrium Social Science ‘Micro-foundations and Systemic Impacts’ Workshop, Sirolo, Ancoma, Italy in September 2012. We would like to thank workshop participants and three anonymous referees for their helpful comments. Any remaining errors are our own. 1 Whether or not contemporary understanding of the microfoundations project is truly consistent with the intentions of the progenitors of this project is a matter of debate that lies beyond the scope of this paper, but see Howitt (1996) and Boianovsky and Backhouse (2006). at European Commission Central Library on December 2, 2015 http://cje.oxfordjournals.org/ Downloaded from