But converting micro-economics into macro has always been a dangerous game.
Quite. Y\’all will have noted that while I write quite a lot about economics around here I do very little macro stufff. Interest rates, currencies, growth forecasts: it\’s not just that I don\’t know much about these things (which I don\’t, not having the math to follow most of the arguments) it\’s that I\’m profoundly unpersuaded of the value of them all, the accuracy of any of the models or forecasts.
Micro, yes, I\’m interested in: as the man said, the proper study of man is mankind, and micro is an attempt (however incomplete) to work out what it is that people do given the constraints and incentives they face. We do indeed find out useful things this way.
The scaling of that up to say that if we just increase interest rates by 0.25% then we\’ll get the economy to steer this way: well, I\’ve always rather thought that this is more in hope than upon any really convincing evidence. It works a lot of the time but not all the time.