In economics, the term microfoundations refers to the microeconomic analysis of the behavior of individual agents such as households or firms that underpins a macroeconomic theory (Barro, 1993, Glossary, p. 594). Most early macroeconomic models, including early Keynesian models, were based on hypotheses about relationships between aggregate quanti...
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Microfoundations are a basis for a macroeconomic model in which economic events are controlled by the rational utility-maximizing behaviour of individuals. It was realized in the late 1960s that traditional macroeconomic models, such as the ISLM model, had no such basis; much of macroeconomics since then has therefore focused on establishing these ...
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http://www.probertencyclopaedia.com/browse/JM.HTM
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