How unfounded microfoundations pollute our thinking and possibility also the world

The rate of time preference or the subjective discount rate in environmental cost-benefit analyses is often calibrated with the Ramsey rule to match market observations of the interest rate. However, this practice suffers from a fallacy of composition, and is illustrative for a methodological flaw in some of the modern macroeconomic literature. I illustrate this by showing how a fictitious economy would be analyzed by a modern (new-classical) economist. Beguiled by micro-foundations that lack a strong empirical foundation, he would derive a subjective discount rate that bears no clear relation with the true preferences of the population; in addition, his policy advice would be time-inconsistent. I
argue that an old-style (neo-classical) economist would do a better job.