Why Economic Theories and Policies Fail? Unnoticed Variables and Overlooked Economics

TL;DR

This paper argues that current economic theories overlook numerous critical variables and processes, which are essential for accurately understanding economic dynamics and predicting business cycles, thus challenging existing models and policies.

Contribution

It introduces overlooked economic variables, collective factors, and market stochasticity, emphasizing their importance in economic evolution and cycle prediction.

Findings

Current theories neglect key variables affecting economic dynamics.

Market stochasticity significantly influences macroeconomic randomness.

Unnoticed cyclical motions explain observed business cycles.

Abstract

Accuracy of economic theories and efficiency of economic policy strictly depend on the choice of the economic variables and processes mostly liable for description of economic reality. That states the general problem of assessment of any possible economic variables and processes chargeable for economic evolution. We show that economic variables and processes described by current economic theories constitute only a negligible fraction of factors responsible for economic dynamics. We consider numerous unnoted economic variables and overlooked economic processes those determine the states and predictions of the real economics. We regard collective economic variables, collective transactions and expectations, mean risks of economic variables and transactions, collective velocities and flows of economic variables, transactions and expectations as overlooked factors of economic evolution. We introduce market-based probability of the asset price and consider unnoticed influence of market stochasticity on randomness of macroeconomic variables. We introduce economic domain composed by continuous numeric risk grades and outline that the bounds of the economic domain result in unnoticed inherent cyclical motion of collective variables, transactions and expectations those are responsible for observed business cycles. Our treatment of unnoticed and overlooked factors of theoretical economics and policy decisions preserves a wide field of studies for many decades for academic researchers, economic authorities and high-level politicians.