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What is the Problem with Economic Theory

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The Problem
Let say, there is a problem: pollution. Pollution is market failure, where the cost of production value is not fully absorb by the company. And there is also similar problem: poverty. Poverty also market failure, where the can be attributed to labor value (the rich getting richer, the poor getting poorer)

The First Problem
The first problem is on definition problem. To be able solve this problem, we must have a clear definition first, which are value. Value is a measurement of the benefit provided by good or service to an economic agent. The first problem is that there is difference among definiton of value from Smith to Misses. From Intrinsic to Subjective Theory of Value.

The Second Problem
The second problem is on methodological problem, the pollution problem in the previous can be seen as
– Positive vs Normative Economics
– Reasons vs Causes
– Social Scientific Naturalism
– Abstraction, Idealization and Ceteris Paribus
– Causation in Economics
– Structure and Strategy of Economics

The Third Problem
The third problem is on perspective problem. Economics is study on country level, which is a inherently macro level. However in country level, a problem can be seen as macro (output & income, unemployment, inflation & deflation) and micro (preference relations, supply & demand, opportunity cost)

So instead solving a problem, we create more problem.

Written by Anjar Priandoyo

Februari 20, 2016 pada 7:03 am

Ditulis dalam Science

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