First, Paul Krugman reflects on what's been coming out of the INET Bretton Woods meeting and the revival of "the oldies" (Bagehot, Kindelberger, Keynes, etc.). In this portion, he ties the problem with the last couple decades back to the microfoundations push:
"Bagehot wrote of panics in which the collective desire to shed risky assets and debt produced a downward spiral; Keynes of situations in which the collective desire to save but not invest led to mass unemployment. And in both cases these arguments suggested a case for government intervention to undo or limit the bad macro consequences of reasonable individual behavior.
But notice that I’ve framed this in terms of “reasonable” behavior; it’s a lot harder to tell these stories in terms of perfectly rational, maximizing behavior.
One response — a pretty good response — is, “So?” After all, maximization isn’t a fact about human behavior, it’s a gadget — an assumption we use to cut through the complexities of psychology and all that, one that can be very useful if it clarifies your thought, but by no means an axiom or a law of nature.
But maximizing models have a special appeal for modern academic economists: they require solving equations! They’re rigorous! They make it easy to show that you’re doing “real research”. And so maximization tends to acquire a bigger importance in economic thought than it deserves."
The point isn't that microfoundations are inherently bad. The point is simply that we need to be intelligent about how we talk about microfoundations. In an earlier post I gave the example of physicists grappling with making quantum mechanics and relativity consistent. It would be weird (wouldn't it?) if physicists said "well relativity really needs microfoundations, so lets try to derive relativity from quantum mechanics and if relativity ends up popping out the other end, that's great - but if it doesn't we just have to abandon relativity." Would that make sense? Of course not. First, we need to really interogate this claim "relativity needs microfoundations". Why? Are microfoundations some sort of scientific pre-requisite? Nope. Nevertheless, consistency is good even if there's not a necessity for microfoundations. But that just leaves open the question - why derive macroprocesses from microfoundations? Why not derive microprocesses from macrofoundations? One is at risk of the ecological fallacy and the other is at risk of the fallacy of composition, but neither is a bad approach in and of itself. You all know my take on this - the Krugman post is very good.
Robert Vienneau has a great review of Nozick up. There are a few things I especially like, starting with his assertion that "libertarians" are better called "propertarians". I would actually suggest that "paleo-propertarians" is better, because not only is libertarianism essentially a philosophy that enshrines property rights - it often offers preferential status to existing or status quo property arrangements. This distinction is important because it's precisely the assignment of rights that determines whether a social order is one of "liberty" or not. This is not something a lot of libertarian seem to appreciate. I did a double take recently when I read Bryan Caplan write: "boosting libertarians' Total Fertility Rate to 3 is the most realistic long-run path to liberty", and as far as I can tell he meant it seriously. Libertarians identify their philosophy with a philosophy of liberty, which is odd for other liberals. It's actually a very specific sort of philosophy of property, and it's not at all clear that a society arranged along libertarian lines would have more liberty. The fact that libertarians identify libertarianism with "liberty" makes engaging with them hard, because they actually do believe this. Convincing yourself of this sort of equivalence is powerful rhetorically; one need look no farther than the Bush administration for evidence of this. It's akin to equating ideas with the will of God - you obviate the need to really probe the idea when you equate it with the will of God. The modern Western world is a world of secular liberalism, and liberty is the new "will of God". If you proclaim your philosophy as being equivalent to liberty ("the will of God") as a matter of definition, you render unintelligible the counterarguments that offer different perspectives on exactly what we mean by liberty ("the will of God") and the implications of a specific philosophy for liberty. Just like with older fundamentalists, when I argue against libertarianism I am perceived as arguing against liberty.
Vienneau has other great points too - including Nozick's begging of the question on how to define "property rights" (a point I raise here a lot). He also presents Nozick's three propositions for the just distribution of property. What caught my eye here is that the third proposition: "Whatever injustices may nevertheless have arisen in original acquisition or transfer must be rectified justly" is usually defined circularly by libertarians - and it is defined on the basis of the very property rights that we're trying to rectify!