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 ...
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