Unsolved problems in economics

Some significant unsolved problems in economics include:

* What caused the Industrial Revolution? This remains one of the most important unsolved questions in all of the social sciences. Unlike similar questions, such as what caused the Upper Palaeolithic Revolution, or the Neolithic Revolution, economics is the social science best equipped to provide an answer.
* What is the proper size and scope of government? Where can government intervention improve on the market? Does a market failure necessarily mean that government intervention is warranted? Can intervention make things worse? If the government intervenes in a market, how should it intervene? To what extent is public ownership of assets and businesses warranted?
* How can heterogeneous production goods be included in a mathematically tractable intertemporal equilibrium construction? Friedrich Hayek made the most famous attempt to solve this problem in his The Pure Theory of Capital, but the "reswitching problem" among other difficulties seems to have put insuperable barriers on the solution to the problem.
* The Great Depression. What truly caused the Great Depression? Did one single event cause it? Was the United States the cause? What set the stage for it? See also: possible Causes of the Great Depression
* The Equity premium puzzle. Can we explain the Equity Premium Puzzle? Why is it that observed average annual returns on stocks over the past century are higher, by approximately 6 percentage points, than returns on government bonds?
* How is it possible to provide causal explanations using the purely logical constructions of mathematical economics? This is a problem which has stumped even the best economists and philosophers of the last 100 years.
* Futures contract model. Can we create an equivalent of Black-Scholes for futures contract pricing?
* What is the microeconomic foundation of inflation? or How does inflation arise from individual agent decisions?
* Is the money supply endogenous? Mainstream economics claims that it is; post-Keynesian economics claims that it is not.
* How does price formation occur? Why do some markets achieve Pareto efficiency?
* What causes the variation of income among groups or individuals? In many countries different groups have significantly different average incomes. This disparity arises even among groups that have never been discriminated against.

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