Journal of Economics and Development Studies

Financial-Economic Crises: their Causes and Remedies
Dr. Ezra Davar

Abstract
This paper reveals and discusses two crucial causes of the continuing deep economic-financial crisis: (1) Dissonance between economic theory (models) and Reality, including the following: (a) Inadequacy of the Modern Microeconomics; (b) Irrelevance of the Modern Macroeconomics; (c) Flaws of the modern monetary theory; and (d) Separation between real (productive) and financial sectors; and (2) Economic Education. To defeat the economic-financial crisis, the paper suggests the following:(1) The microeconomic theory has to be reformulated on the basis of classical and neo classical theory, accordingly to today's real economy. (2) The macroeconomic theory has to renewed, also on the basis of classical and neo classical theory, taking into account the changes in today’s real economics. (3) Textbooks of microeconomics and macroeconomics have to be rewritten, consequently reformulating micro theory and renewing macro theory.

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