Farhi is convinced that most of the macro models now in use assume a representative consumer or an aggregate production function, turning their backs on a heterogeneous reality that is nonetheless there for input. “As more large-scale micro data sets become available, the sheer amount of microeconomic heterogeneity is becoming more and more apparent,” the economist contends. “Building a new macroeconomics via disaggregated models that can make contact with the microeconomic data is emerging as an intellectual priority.”

In the meantime, “most models still rely on an unsatisfactory, simplistic view of production by assuming an aggregate production function.” Farhi’s goal in this year’s lecture, titled “The Microeconomic Foundations of Aggregate Production Functions” is precisely “to point out this deficiency and to show how to think about production from the ground up, taking into account the heterogeneity of producers and their complex input-output network linkages.”

Farhi was among the co-authors of a January document that set out a reform package for the European Union aimed at reconciling tighter fiscal discipline with an increase in risk-sharing across Member States. “We proposed a way to reform the Eurozone to make it more efficient and more resilient,” he explains. “We believe, for instance, that it is very important to complete the European banking union.” Other proposals include strengthening stability criteria, the creation of a stabilization fund to help Member States cope better with major crises or the design of new safe assets by securitizing sovereign debt.

For Farhi, Europe is enjoying a rare window of opportunity for this kind of reform: “I hope that it will not be wasted and result only in symbolic measures that will not fix the very real problems of the current architecture of the Eurozone. The Eurozone is at a point of maximal fragility: too integrated since each country cannot deal with asymmetric shocks with their own monetary policy, and not integrated enough to compensate for the loss of monetary independence via other instruments.”

The Harvard professor, also a research associate at the U.S. National Bureau of Economic Research, and an advisor to Emmanuel Macron during the electoral campaign that took him to the Élysée Palace, believes that the main risk facing the European Union is one of political commitment: whether or not it will be capable of breathing “a new positive energy into the European project in order to carry it forward and revive a sense of solidarity and common destiny, while respecting national and local identities. We are living through a messy transition, and it is hard to see exactly how the underlying structural forces will play out.” Nonetheless, he adds, “I am hopeful.”