Home
Traditional approach to macroeconomics is not correct and there is need to develop a new approach.Basic question come into mind when start studying macroeconomics whether its part of Humanity or Science.If it is a historical subject then lots of things matters like we have to look at the historical context of the theories that how it was designed and what problem the theories are going to solve. These things needed to be studied within history. If it is a Science then all of the above mentioned things do not matter. Also the theory is universally invariant; it does not matter about history. Same theory will apply in Pakistan, India, Brazil, China and England, in 19th, 20th and 21 century. The law of gravity is same so we don’t need to study history. So, there is a difference between these two approaches.
According to the standard definition accepted by everybody on this planet, economics is the social science which means that we want to apply the scientific methods to study human beings and society. This means that history is irrelevant so we don’t study history in our economic text books. The Great Depression and Global Financial Crisis of 2007 were the biggest economic event of 20th and 21 century but none of the text books ever consider these events only because its history. History is not science. Any particular event, like WWII, is only one event but it is not a law.
Scientific approach is to look for patents which are universally invariant and they happen all the time. It this case science requires to have quantitative methods, data, have to measure everything but if something cannot be measured then it does not exist. If we say that trust worthy and honest matter in economy but it is something that is not measurable so it is not taken into account in economic theories. Similarly if economics is part of science then we have to have equations so we can find the formula which can tell how the society will evolve, how much you buy of any good, have to have calculus and differential equations and then we solve these lengthy mathematical models. But the reality is that human beings don’t follow formulas. So it is necessary to adopt changes in macroeconomics that can make it close to reality.