Question:

Can you defend the theory of Macroeconomics in the real world?

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I don't get it! Macro (and Micro) Economics are based on this perfect world of if everyone acted in exactly the way they expect them to then X would happen. But it almost NEVER

happens that way. Policy is based on this junk. Economic stimulus checks as an example ASSUME that eveyone will spend their check on junk- tvs, clothes, etc.- NOT bills or savings. How does this theory work since people DO NOT act in the manor in which macro assumes they do? Also thinking about GDP and all of its problems in calculation. Please tell me how Macro can be defended and why it should be taught in schools- required even (by most business schools at least).

thanks.

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3 ANSWERS


  1. Economic theory is in fact just that...theory. It's not perfect, but neither is the weather or any other science that requires you to make a prediction about the future.

    It's important to understand the economic model so that you can make "adjustments" to compensate for real world behaviors and get you a closer estimate to what might happen if you do. There are still several factors that contribute to the model such as trends, market strengths, and historical data. It more of an extremely educated guess than it is junk.

    ...And if all else fails (if you study economics) when you're standing in the unemployment line, at least you'll understand why you're there.


  2. Economics is all about application of wealth without knowing what is wealth. Unfortunately the science that deals with nature, composition, properties, laws and classification of wealth has no name as on date. It is not studied by any one. No one studies wealth the way chemists study matter.

    General laws like Law of Conservation and Law of Equilibrium are totally ignored. How can one find answers to problems when one lacks basic knowledge?

  3. check out kensian (sp?) ecomomics and how aggregate supply/demand got the US out of the great depression how giving people jobs gave them money to buy things (they got the jobs by the Gov't spending money on the jobs have you heard of the New Deal)....as for the stimulus checks and saving or paying bills. saving is a form of investment which boosts GDP(=C+I+G+NetX) and paying bills gets money back to the corporations who supply jobs and facilitate global markets

    the kensian way of econ is getting a tad out dated due to recent technological advances and lack of population control it just needs to be reformed and tweaked to work in the present day society

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