What are Economic Theories?
Economic theories try to explain economic phenomena, to interpret why and how the economy behaves and what is the best to solution – how to influence or to solve the economic phenomena. They are comprehensive system of assumptions, hypotheses, definitions and instructions what should be done in a certain economic situation. In principle, the approach to economic theory is divided into positive and normative.
All economic theories used to explain specific situations or problems in the economy of some of its models. These models of economic systems try to explain the situation and solve it using approaches that are typical of the economic theory (eg. Keynesian theory subdued stimulate the economy through government money).
What economic theory is correct, the right one?
There are multiple approaches, schools, hypotheses interact and in many ways and often contradict. Economics is not an exact science and how it develops (during the time), evolves and changes with the theory. It’s about access (like politics or philosophy) – and there never will be the only one true and correct economic theory.
What are the major economic theories?
- Classical economic theory – roughly the 50s
- Keynesian theory – 1936 to 80s
- Monetarism – roughly from the late ’50s
- New Classical theory – from the 70s to date
- New Keynesian theory – from the 80s to date.