Prior to the financial crisis, these so-called representative-agent models were the dominant paradigm for analyzing many macroeconomic questions. However, a disaggregated approach seems needed to understand some key aspects of the Great Recession.. . .
More generally, studying the effects of household and firm heterogeneity might help us better account for the severity of the recession and the slow recovery.
Pointer from Mark Thoma.
You might have to go much farther than Yellen has in mind in thinking in terms of heterogeneity of firms, workers, and households. At some point, it ceases to be macro.
And there is this:
the influence of labor market conditions on inflation in recent years seems to be weaker than had been commonly thought prior to the financial crisis. Although inflation fell during the recession, the decline was quite modest given how high unemployment rose; likewise, wages and prices rose comparatively little as the labor market gradually recovered.
I disagree with the standard models of inflation, including the monetarist model. Specialization and Trade offers my answers to all of Ms. Yellen’s questions.
I think the biggest problem for disregarding Macro is we stil to measure what is going on in the economy. We know such items like unemployment rate, labor participation, GDP, GNP, or inflation rate are less than perfect but it is a good indication of what is going on in the economy. I always figured Keynes influence in 1931 grew compared to Hayek because he had some high level explanations versus Hayek complaining about workers not taking big enough wage cuts.
Additionally, Macro is necessary since it better interacts with other Political-Sociology factors. I tend to believe that current slow growth Macro is a product of changing expectations of late marriage and less children born. (Historically speaking here.) So if the total population is growing slower and getting older, it is no surprise what has happened in Japan with low growth and low interest rates.