I don’t think that Solow, in particular, has ever tried to come to grips with any of these issues except by making jokes
Though, these exchanges are funny I think they reveal something deep and its why I tend to side with Mankiw-Solow camp. Lucas is essentially saying that Keynesian doesn’t make any sense. Solow is responding that Frictionless Markets don’t match reality.
My take is that at its heart this is exchange is about whether economics is philosophy or science. For philosophy logical consistency is paramount. But, in science, empirical observation wins. I side with science.
If the world doesn’t act like its described by Freshwater Models then all the elegance in the world can’t save you. If the only explanation anyone can think of that fits the data is that a Giant Purple Elephant did it. Then Giant Purple Elephants it is.
That doesn’t mean we have to be satisfied with GPE model, but unless you got something better . . .