Failure of Economic Theories

Economic theories are whollyinadequate to explain the complexities of the real world around us. My articles establishing the strong mismatch between reality and economics, and also explore its consequences. Some articles  also explain why economic theories continue to be taught even though they are strongly refuted by empirical evidence.

The Crisis in Economic Theory: The financial crisis of 2007 violates several central propositions of modern economic theory, including investor rationality, and efficiency of market prices.

The Global Financial Crisis of 2007:  Economists could not predict this, or any other crisis in the past, and could not provide remedies afterwards, because economic theories are seriously defective.

Economics: The ‘vacuum cleaner’ effect: Conventional economic growth theory concentrates on increasing the wealth of nations and assumes that the increased wealth will automatically reach the poor – the trickle down effect. Recent data shows the opposite: increased wealth is sucked up to the top, becoming increasingly concentrated in the hands of a tiny minority.

Failures of Economic Policies for Growth: Conventional economic theories have been proven failures because they reduce the complex process of economic growth to one dimensional focus on accumulation of capital. Experience shows that one must pay much more attention to human development.

Successful Development Strategies: The successful development strategies followed by the West were colonization and imperialism. These are no longer open to us. Instead following impractical and unrealistic theories which have never been successful, let us look to proven successes like the East Asian miracle countries.