Changes in theoretical paradigms have predominantly been driven by Coursework

Changes in theoretical paradigms have predominantly been driven by black avouch events rather than resulting from proven paradigm - Coursework ExampleIn the world of finance, these events are those that effect dramatic market movements, much(prenominal) as, for obiter dictum, the 2001 terrorist attacks, as substantially as the 2007 financial crisis, which both drove the markets dramatically lower. The recommended financial strategies to accommodate large market failures precipitated by black swan events are, of course, centered on allocating a small percentage of a total portfolio towards investment instruments that are to spike when the markets crash, while keeping the large share of the portfolio in the safest, black swan-proof, investment vehicles. This is case of a broader strategy aimed at spreading the risk among a greater number of vehicles for investment. One can say that these investing strategies may be an offshoot of an economic theoretical paradigm that may not be s uperior, solely is conditioned by the painful experience of previous black swan events. The radical explores the dynamics of discharges in theoretical paradigm springing from black swan events (Kim 2010 Bloch 2013 Sood 2013). II. Discussion A history of tectonic changes in macroeconomic paradigms can be summarized as tales of existing economic thinking, such as classical economics and fundamental add up and demand models being upended by black swan events, such as the Great first in the case of classical economics. ... During the Depression this amounted to heavy spending by the US government to get the economy extinct of its hole. One can argue from this that the new paradigm is adopted not because it is necessarily superior, but because it adequately addressed the black swan event of the Depression, and showed well-behaved results in spurring the economy back on a track to growth. This new paradigm fixed demand, but was not particularly suited for instance to the black swan event of stagflation, where the economy was stagnant even as inflation spiked. The problem in this latter black swan event was that supply fell, leading to spikes in the prices of fuel and of food. This black swan event then led to a shift in paradigm back to classical economics, with Milton Friedman disceptation that market forces are the best determinants of market efficiency, and are best left to their own devices, with the emphasis this time not on demand, as in Keynes, but on supply-side economics. Here then, from two successive black swan events, is proof that changes in economic paradigms are not necessarily driven by the shift to superior paradigms, but rather are borne out of the need to correct the imbalances and inherent problems in economic policies that were made evident by the black swan events. In these two examples it can be argued that classical economics and the efficiency of market forces is the superior paradigm, but as a result of the Great Depression it was ju nked in favor of Keynes, only to be re-adopted, tweaked, after the stagflation crisis in the 1970s (Sood 2013 Bloch 2013). On the other hand, fast-forward to 2007-2008, the global financial crisis again put into question the validity of the Friedman model, given that the