The author of this article was aimed at analyzing key questions that arise from economic theory and that they require special treatment from the already researched solutions. He further emphasized entrepreneurial analysis and, therefore, will indicate that it will assist investors to acquire maximum profits by obtaining maximum utility.
Based on his observation, he argued that there is not and will not be any economic theory that will address universal issues both currently and in the future that have been developed. The author gave a reason as to why economics has always been regarded as a difficult subject. He, therefore, defended himself saying that economic matters tend to change rapidly. It will be uneasy for the learner to capture what is expected of him within the stipulated time. In his comparison, he believes that the rate at which problems arise is too fast as compared to how economic concepts are applied in solving any arising problem. According to Sharpe Williams, he believed that mathematics has emerged as a science that has been used to handle economic problems although he doubts that it may appear that most of the formulas that are used are purely exaggerated (Bibow, 2009). Sharpe William also in his article argued out that there are several issues that linked mathematics with economics. He listed some of these characteristics as probability and numerical utilities, essentials of measurement among others.
In considering at am economic theory, it varies from one theory to another based on its structure and the number of applicants involved. Analysts have, therefore, sought to come up with a mathematical concept that is completely revised.
With regard to Neumann, the body of positive microeconomic theory absence which is responsible for conditions risks has greatly affected those in pursuit of predicting the behavior of capital markets. Despite the fact, that traditional models can be useful as far as investment is concerned, according to the author, cases of certainties, price behavior as a model have been adopted by those respective analysts due to the risks attached to financial transactions. This action has pressurized the entire process. In order to grasp the concept of what determines capital asset price, he stated that one should consider describing the processes at which an individual preference relates physically and how they interact purely with the interest rate. Afterward, the author outlined that the risk-premium will also be determined; in addition, he added that the price of asset adjustments as per their accounts will vary from one asset to another.
The author based his arguments on capital markets and assets. In his discussions, therefore, he concluded that for one to understand the implication of capital market, a case of an investor can be used to illustrate. The capital price will adjust at equilibrium, therefore, enabling him to make a follow-up on the rational stages. He further added that they will then be able to attain capital market equilibrium along the axis. The investor according to him can only expect a higher rate only if his holdings incur additional risks (Lasb, 2009).
The author made in his remarks that currently, no theory has yet been found that can clearly describe how price-attached risks are affected by basic influences preferences from the investor. This has, therefore, made it difficult to determine the relationship between the price and risks attached to a single asset. At some point, the inherence of risks can be diversified in a single asset so that the final risks will not hinder the asset’s price.
The author further extended his explanation citing that, in a case where borrowing is possible, a single plan of investment will overcome the other investment plans. When the rate of lending equals the rate of borrowing investment plan, the result will be the same as when lending was dominant (Chazan, 2010).
In his conclusion, he recommended that capital market equilibrium is only achieved when two assumptions are made; the similar rate for borrowers and lenders for all investors, and secondly, investors should be assumed to have agreed on a ground of varied investments. Another requirement is that the price of capital assets should change so as to give various prices. In doing so, the assets will at least enter one combination of the capital market line.
The two authors focused on strategies that can be used in order to ensure developed economic theories that are put in place without encountering any problem. The author of the first article looked at the difficulties connected to economics and its theories. The author of the second article aimed at employing the already developed theories in ensuring business operate successfully. The two articles, therefore, seem to have contradicted themselves in the way they argued their issues.
References
Bibow, J 2009, Keynes on monetary policy: Finance and uncertainty reassessing liquidity preference theory, Routledge, New York.
Chazan, R 2010, Reassssing Jewish life in Mediaval Europe, Cambridge University Press, Cambridge.
Lasb, J 2009, International financial accounting reporting standards, Kluwer, New Jersey.