Summary: The Case for a New Approach

Abstract

The purpose of economics is to try to understand and predict the working of a market economy. Its method is to formulate assumptions consistent with experience, and to use them to derive theories that yield verified (or at least nonfalsified) predictions of economic behaviour. Economists have developed useful theories to account for fluctuations in prices and quantities in particular markets. But people expect more than that. They want to know why some economies are more prosperous than others, why some grow fast, while others stagnate or grow more slowly. The answers to these two kinds of questions — the micro-economic and the macroeconomic — may be related, but for most people the second group is much the more important of the two.