A Philosophical Paradox of Economic Theory

This article discusses the obvious paradox of economic theory. What is the point of a theory that cannot work and should not work in practice? If economic theory did work, a multitude of economic models could be used to predict any variable with economic and financial consequences for humans or organizations. Knowledge of future realized values of such economic and financial variables, ranging from stock market values to the number of nurses needed in Norway in 2030, gives the power to make a profit. Given information on Apple’s stock market values in a multitude of future time periods, the information holder has the ability to buy stock when it is cheap and sell when it is expensive. Such a strategy builds risk-free profits, in principle infinitely high. We all know what happens in markets where one or a set of agents obtains infinite profits: the rest of the market will lose infinite profits, and the market breaks down. Perhaps we can say it like this: _If economic theory had worked, no economy would exist._