Commentary on "Measuring and Analyzing Aggregate Fluctuations: The Importance of Building form Microeconomic Evidence"

To prevent their theories from becoming as unhinged as the Phillips curve, modern macroeconomic theorists conventionally build from microeconomic fundamentals. Recent empirical studies of macroeconomic phenomena that heavily use data from individual producers, exemplified by the work of Davis, Haltiwanger, and Schuh (1996), have convinced empirical macroeconomic practitioners they should do the same with their craft. The necessary econometric tools are increasingly available for this task, and the work of many individuals inside and outside government have made the necessary observations available. Yet, this enterprise is increasingly hindered by a data collection organization oriented towards a view of macroeconomics without miocroeconomic foundations. This state of affairs sets the stage for “Measuring and Analyzing Aggregate Fluctuations: The Importance of Building from Microeconomic Evidence.” John Haltiwanger has two goals. First, he intends to convince us of the utility of building empirical macroeconomic analysis from microeconomic foundations. Second, he wishes to highlight obstacles to this research program inherent in our national collection process and suggest beneficial changes in this process. The author does an outstanding job at the first task. My comments regarding this section of the article will mostly reinforce the points he has already made. I will comment on the second goal by suggesting further changes in the way data on producers’ prices and balance sheets are collected and by stressing the importance of economic theory in the enterprise. WHY ARE MICROFOUNDATIONS IMPORTANT?