Economics needs to address economic issues and problems

Comments on Tony Makin “We keep repeating Keynes's mistakes”, 26/08/2009, http://www.theaustralian.news.com.au/story/0,25197,25981707-5015664,00.html

Tony Makin's argument may be more relevant to the current Australian case where the aggregate demand may not have fallen too much and interest rates are not zero and monetary policy is still effective. However, it is a step too far to say the same thing to the current US case and possibly the UK case.

While the consistency in microeconomics is nice in theory, but that theory is based on some assumptions that may not always hold and therefore while the consistent theory always works in theory, it can fail the reality. When it fails seriously, generalised Keynesian theory can help. To deny that is just like to say that the air is always pure and there is no virus in it.

Economics is not just for the sake of a nice and consistent theory. Its main usefulness is to solve economic problems. Anyone who does care the reality will always find difficulties with some not so elegant but actually workable alternatives.

Theoretic ideology alone is insufficient to addressing real economic issues and challenges. Unfortunately, different theoretic ideologies are extremely strong in economics. That is a pity.