Economic Theory Versus Economic Reality

Economic Theory Versus Economic Reality
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Economic Theory Versus Economic Reality
In economics, theory and reality tend to affect each other and economic theory has sweeping practical impacts that result in changes in economic behavior and policy (McGregor & Pouw, 2016). However, there have been increasing concerns that dominant models in economics do not provide channels of understanding and addressing today’s problems of a rapidly globalizing and changing world. Examples of theories that I have learned with practical consequences are neoclassical economics and Keynesianism (Gali, 2018). Equally, many changes in economic reality are often reflected in economic theory. While economic theory serves to predict and explain the dynamics of a working economy, the theory may face several bottlenecks in each of these respects. I have learned that economic theory may be flawed, not capable of coping with real-life challenges due to its limitations in assumptions and variables, and its inability to foresee unexpected events.
The challenges witnessed...