ABSTRACT
This chapter starts with the Swedish Flag, a metaphor introduced by Leijonhufvud in order to depict the course of macroeconomic thought in the twentieth century. Turning to the correspondence of macroeconomics with microeconomics, the assumption is that aggregate behaviours represent the sum of individual ones, being consequently traceable to them: in other words, macroeconomics has to be microfounded. The basic presupposition of the Swedish Flag is the benchmark represented by competitive general equilibrium, i.e. the assumption that it represents the state of an economy's health. To start with perfect individual rationality, this assumption presupposes optimising agents with rational expectations. This means referring to Olympic demigods, who possess perfect information and the cognitive skills required by perfect foresight and optimisation. The macroeconomic debate starts with The General Theory, which Leijonhufvud places in the RR square of the Flag. The state of the real economy's health does not imply an invisible hand, but presupposes a balanced relationship between antigens and antibodies.
