Why Economics Only Works In Theory

The issue isn’t that economics fails when applied. It’s that a certain version of it struggles even before it leaves the page.

Photo by Towfiqu barbhuiya on Unsplash

I keep hearing the same line: “economics doesn’t work in the real world.” Or “it only works in theory.” Usually said after another policy promise fails. Fair enough. Governments do make big claims… and then quietly miss the mark.

This raises an important question: Is economics the problem – or something else?

I ask because when people say, “economics failed,” what they usually mean is this: a policy failed. Price caps that led to shortages; stimulus that pumped money in but didn’t quite deliver the growth it promised. Regulations that were meant to bring stability but somehow made things messier.

So, I ask – are we criticising economics itself, or the version of it taught at universities and used by governments?

That distinction matters more than people think.

I didn’t arrive at this by trying to be difficult - quite the opposite. The more I read Ludwig von Mises, the more something felt off about what’s usually taught as “standard” economics. Not ideologically off, but methodologically. The cracks in the standard econ narrative aren’t surface deep; they run straight through the foundation.

Take the obsession with mathematics

Now, don’t get me wrong – math is useful. In the right place, it’s brilliant; but in economics? It often feels like forcing a square peg into a round hole.

Mises approached things differently, through what he called Praxeology – basically starting from the simple idea that people act with purpose. That’s it. No equations required to prove that. From there, you build logically.

Mainstream models go the other way. They start with equations. Clean, elegant, satisfying… and quietly detached from how people behave.

Here’s the problem; models need stability – fixed relationships, measurable inputs, repeatable outcomes; but human preferences don’t sit still, they shift, contradict themselves and even change on a whim.

So, when all that gets compressed into tidy formulas, something is lost. Actually – more than something. The reality itself. What you’re left with looks impressive, but it doesn’t feel real, because it isn’t.

Then there’s this fixation on “equilibrium”

The idea that markets naturally settle into a kind of balance – everything aligned, supply meeting demand, no loose ends.

Sounds a little too neat, and very much unlike the real world. I’ve never seen it happen once – no one has. Markets don’t sit still. They move – constantly as people guess, adjust, get things wrong, and try again. New information shows up, old assumptions collapse. That’s the process.

Equilibrium, as it’s usually presented, feels like a snapshot of a world that doesn’t exist. A destination no one ever reaches. Yet so much theory is built around it, as if it’s the default state.

That’s where things start to drift. Because if your starting point is imaginary, your conclusions won’t land cleanly in the real world either.

Then comes the data argument

“Look at the numbers,” they say. Regressions, models, correlations – pages of them. The implication being: we can treat economics like physics. Observe patterns, test hypotheses, uncover laws.

I get the appeal. It sounds rigorous, academic, prestigious even. However, something about it doesn’t hold up. In physics, you can isolate variables. Run controlled experiments. Repeat them. Economics doesn’t give you that luxury. Every event is tangled up with everything else – culture, expectations, timing, policy shifts, random shocks.

So, when we see patterns in the data, what are we seeing? A law? Or just a one-off outcome shaped by a hundred moving parts?

That doesn’t make data useless. It tells us what happened, but it doesn’t necessarily tell us why in any clean, universal sense.

Policy is where all of this cashes out

Mathematical models – however abstract – don’t stay on paper – where they should. They are used to justify interventions, to design programmes, to “manage” the economy.

Stimulus here. Monetary expansion there. New rules layered on top of old ones.

Each one built on assumptions that often gloss over reality: limited knowledge, delayed effects, unintended consequences.

From a Misesian angle, that’s where the real danger sits.

Prices aren’t just numbers. They carry information – about scarcity, preferences, trade-offs. When they’re pushed around artificially, that information gets distorted. Businesses respond to signals that don’t reflect reality. Resources end up in the wrong places.

At first, it might look like things are improving. Then the correction comes. And it’s rarely gentle.

Now, I’m not pretending this perspective answers everything. It doesn’t. No framework does, but it asks better questions. Uncomfortable ones. The kind that forces you to admit how little we control – and how quickly neat theories fall apart when they meet real human behaviour, and maybe that’s the point.

So, when someone says, “economics only works in theory,” I don’t just nod along anymore. I push back – slightly, because the issue isn’t that economics fails when applied. It’s that a certain version of it struggles even before it leaves the page. If the foundation is unstable, no amount of policy fine-tuning is going to fix the outcome.

Which brings us right back to the original complaint. It’s not economics that keeps missing the mark. It’s the model being used, and until that’s confronted properly, we’ll keep seeing the same cycle – confidence, intervention, disappointment – played out repeatedly.

Econ Bro (@EconBreau and @EconBreau2 on Twitter/X) is a Nigerian Austrolibertarian economist and an apprentice at the Mises Institute. Under the organisation name “The Freedom Institute” he teaches individual liberty, personal responsibility, private property rights, free markets, and sound money to mostly young people across Nigeria. Econ Bro is an Associate of the Free Market Foundation.