The right answers to the wrong question? An assessment of the microfoundations debate

Summary In this paper we discuss several conceptual features of the microfoundations debate. The recent revival of this debate, with its emphasis on specific characteristics of markets (partial economics), tends to shift attention away from more fundamental considerations about the workings of a market economy (the issue of coordination). In fact, the coordination issue has been neglected because Walrasian general equilibrium theory serves as a benchmark in the microfoundations debate and in this theory perfect coordination is simply assumed. In our view the debate has therefore mainly provided the right answers to the wrong question since the coordination issue is essential for the analysis of the economy as a whole.We would like to thank T. Cate, M.C.W. Janssen, L.H. Hoogduin, J. Pen and, especially, S.K. Kuipers for their comments on a previous version of this paper. The useful comments of an anonymous referee are also gratefully acknowledged. Of course, the usual disclaimer applies.