Gene has a typology of business cycles up, the last of which is:
"Those that resemble microeconomic models from a distance"
The typology is supposed to be funny, but this is one type of business cycle theory that for some reason everybody goes weak in the knees over. I think I'm cynical because in class today - going over properties of binary relations - we ended up talking about a lot of assumptions of neoclassical consumer theory. It all sounds reasonable of course at first glance, but by the time the professor was done with it you wondered how this stuff survived. The reason, of course, is that abstracted consumers in neoclassical microeconomic theory provide an approximation that is useful for explaining observed behavior.
I happen to think that's a pretty good answer. I've never been one to throw out the neoclassical baby with the bathwater.
But I'm still suspicious enough of it all to really scratch my head at the obsession that many people have with "microfoundations of macroeconomics". When I told a lot of my colleagues at the Urban Institute that I was hoping to do macroeconomics, many were surprised. My supervisor said she could never get into macro because "it seemed so made up", that "micro seemed real". Another senior researcher said the same thing - that micro was "about real stuff". I really don't understand how people can think like this. Microeconomics seems like the faker to me. I know what GDP is. It's the market value of all final products. Easy. I know what the money supply is. It may be hard to count and there may be multiple definitions. But you don't have to make weird mathematical assumptions to talk about what it is. We know what it is - we just have a hard time measuring it. All the fundamental building blocks of macroeconomics are very real and you don't have to make any crazy assumptions to get a sense of them. You start making abstractions and assumptions when you begin to model their relations, of course, but you have a very firm base.
Microeconomics isn't like that. Even the building blocks of microeconomics are abstract and unrealistic, to say nothing of the theorized relations of one building block to another.
I think microfoundations will be looked back on as probably a good thing to think about some in the sixties, but something that was blown way out of proportion to its importance over the ensuing decades.