Preview

3. Cases Where Traditional Economics Doesn’t Work

Powerful Essays
Open Document
Open Document
2728 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
3. Cases Where Traditional Economics Doesn’t Work
Content

1. Introduction…… …………………………………………………………………….….3
2. Traditional economics theories ………………………………………...……………….4
3. Cases where traditional economics doesn’t work……………………………………….6
4. Conclusions…………………….………………………………………………...….….10
5. Bibliography………………………………….………………………...………………11

1. Introduction. Economic theory is described as the result of the accumulation of knowledge. It is assumed that the opinions dominant today represent the highest stage of knowledge about the economy as today’s physics is superior to that of the 19th century. This superiority can be questioned. Theories are always embedded in certain paradigms, worldview and perspectives that change on account of political-economic developments. Thus the neoclassical theory prevailing today is different than the Keynesian theory that marked the decades after the 2nd World War. However it is not inevitably better. Economic theories are constantly changing. Keynesian theory, with its emphasis on activist government policies to promote high employment, dominated economic policymaking in the early post-war period. But, starting in the late 1960s, troubling inflation and lagging productivity prodded economists to look for new solutions. Economic theories will be debated and tested. Some will be accepted, some modified, and others rejected as we search to answer these basic economic questions: How do we decide what to produce with our limited resources? How do we ensure stable prices and full employment of resources? How do we provide a rising standard of living both for now and the future? This process continues today and its motivating force remains the same as that three centuries ago: to understand the economy so that we may use it wisely to achieve society 's goals. The purpose of this assignment is to provide an understanding of what an economic theory is, describe some cases where limited possibilities of traditional economic theories appear and try to determine why it happens.

2.



Bibliography: 1. Blaug M. Economic theory in retrospect. Cambridge University Press, 1985. 2. Friedman D. Hidden Order: the Economics of everyday Life. HarperCollins Publishers, Inc., 1997. 3. Lipsey R. An introduction to positive economics. Seventh Edition, Weidenfeld and Nicolson London, 1992. 4. Mansfield E. Micronomics:Theory and Applicatons.W.W.Norton & Company Inc., 1979. 5. Ruffin R.J., Gregor P.R. Principles of Macroeconomics.Fourth Edition, Scott, Foresman and Company, 1990. 6. Sloman J. Economics. Simon and Shuster International group, 1991.

You May Also Find These Documents Helpful

  • Good Essays

    Db 4 Instruction Only

    • 368 Words
    • 2 Pages

    * In the first paragraph, discuss the relevant economic theory of your topic (your textbook is a good source for this paragraph).…

    • 368 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Christian Ethics Project

    • 478 Words
    • 2 Pages

    2. Does your textbook present only positive economics and avoid any normative economics? If not, give some examples of normative issues covered in your textbook.…

    • 478 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Sullivan, Arthur; Steven M. Sheffrin (2003a). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 79.…

    • 2769 Words
    • 12 Pages
    Powerful Essays
  • Good Essays

    Christian Ethics

    • 701 Words
    • 3 Pages

    Does your textbook present only positive economics and avoid any normative economics? If not, give some examples of normative issues covered in your textbook.…

    • 701 Words
    • 3 Pages
    Good Essays
  • Better Essays

    Economcis in One Lesson

    • 1914 Words
    • 8 Pages

    Hazlitt points out many faults in the economy. There are many influences to such, and causes for its change. The government and taxation, technological advancements, employment, pricing, wages, and inflation are just a few topics that are broken down. Each chapter talks about a different subject and gives an argument talking about the misconception and the actual economic theory behind it, using common examples.…

    • 1914 Words
    • 8 Pages
    Better Essays
  • Powerful Essays

    Kayne vs Hayek

    • 1354 Words
    • 6 Pages

    “John Maynard Keynes” was born on June 5, 1883. He was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments. He greatly refined earlier work on the causes of business cycles, and advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions. His ideas are the basis for the school of thought known as “Keynesian economics”. In the 1930s, Keynes spearheaded a revolution in…

    • 1354 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    People always struggled with an idea of prosperity and success, whether it was a personal goal or whether it was something major - like wealth of a country. Nowadays, we are studying a science, which is really significant and valuable - Economics. Economics is a tool for achieving those goals, knowledge that people can use and imply in real life, and at the present time probably undividable part of governments' performances around the world. For us, students, there are two different matters we study - Macroeconomics, the study of the performance of national economies and Microeconomics, which focuses on the behavior of individual households, firms, and markets.…

    • 1985 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Armchair Economist

    • 651 Words
    • 3 Pages

    In the book The Armchair Economist: Economics and Everyday Life, Steven E. Landsburg explains economic theories and applies them to current problems and situations. He begins with the basic concepts of economics and builds off those to more complex theories and situations. The simplified models and easy to understand examples he uses make the theories of economics less daunting and easier to understand. On top of being simple, his examples are also current making them easier to comprehend because they are contemporary with my own life.…

    • 651 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Game Theory and Economic Analysis presents the wide range of current contributions of game theory to economics. The chapters fall broadly into two…

    • 83837 Words
    • 336 Pages
    Good Essays
  • Good Essays

    Theory, whether in economics or sciences, helps ones predict and succeed in explaining on what they intend to explain relies on convincing assumptions. However, accuracy and validity of theories are important as the more accuracy in the theory, the more success in whatever business or science. Hence, all theories should be tested whether they are practical in the reality. If they are not, we should develop and modify them so that ones can make good predictions with current circumstance and match reality, otherwise these theories will be useless.…

    • 730 Words
    • 3 Pages
    Good Essays
  • Good Essays

    The economic problem can be described as attempting to satisfy the unlimited and ever changing wants of the consumer with limited resources. As these wants can never be satisfied, all individuals, businesses and governments are faced with the choice of what to obtain with those resources. As each consumer group's wants and resources varies greatly, each deals with trying to solve the economic problem in a different way.…

    • 591 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Summry: 1.Almost all economics is based on models. An important assumption in economic models is the other things equal assumption, which allows analysis of the effect of a change in one factor by holding all other relevant factors unchanged.2.One important economic model is the production possibility frontier. It illustrates: opportunity cost, efficiency, and economic growth. There are two basic sources of growth: an increase in factors of production, resources such as land, labor, capital, and human capital, inputs that are not used up in production, and improved technology. 3. Another important model is comparative advantage, which explains the source of gains from trade between individuals and countries. Everyone has a comparative advantage in something. This is often confused with absolute advantage, an ability to produce a particular good or service better than anyone else. 4.In the simplest economies, people barter or trade goods and services for one another—rather than trade them for money, as in a modern economy. The circular-flow diagram represents transactions within the economy as flows of goods, services, and money between households and firms. These transactions occur in markets for goods and services and factor markets. 5. Economists use economic models both for positive economics, which describes how the economy works, and for normative economics, which prescribes how the economy should work. Positive economics often involves making forecasts. Economists can determine correct answers for positive questions, but typically not for normative questions, which involve value judgments. 6.There are two main reasons economists disagree. One, they may disagree about which simplifications to make in a model. Two, economists may disagree—like everyone else—about values.…

    • 1525 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Economics is both normative and positive science,it is the study of facts as well as ideal theories and principles explained as follows:…

    • 773 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    It is important to study economic history for a number of reasons, those which I will discuss in my answer include the fact that the study of economic history is fascinating and it tells us who we are, in addition to the fact that history gives perspective, and finally I will give a short account of how history tests theory.…

    • 744 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    In this essay I will analyze philosophical and psychological approach to the economic issues by David Hume, which have played a significant influence on the formation of classical economics, and especially on the work of another great philosopher Adam Smith.…

    • 4390 Words
    • 18 Pages
    Powerful Essays