Relations, Risks, Portfolio Theory and Key Natural Laws in Economics

Abstract

Economics can be more practical if relationship and risk, as well as scarcity and abundance, are considered key elements in economic analyses. By applying relations and risks through MPT, the long and difficult task of introducing an appropriate economic environment into a balanced pricing model can become a reality. Accordingly, both individual and social rationality can function independently and a strong balancing effect can be established without any governmental intervention in the pricing model. Alternatively, a more philosophical approach is required for revealing the content of key natural laws in macroeconomics. Several ancient conceptual schemes and doctrines that are well known among Chinese people are suggested to serve this purpose. The conclusion from this study is that the evolution of the global economy still complies with key natural laws in macroeconomics; however, severe violation of key natural laws in microeconomics requires immediate remedy.