4.1.1.1 Economic methodology Flashcards
What is economics as a social science?
Economics is a social science that studies human behavior in relation to scarce resources and decision-making. It uses models and assumptions to analyze real-life scenarios, as it cannot conduct controlled experiments like natural sciences.
How does economic methodology differ from natural sciences?
Economists cannot conduct scientific experiments like natural scientists. Instead, they use models based on real-life scenarios and make assumptions, such as ceteris paribus (holding other factors constant).
What is the ceteris paribus assumption?
Ceteris paribus is a Latin phrase meaning ‘other things being held constant.’ It is a key assumption in economics to isolate the effect of one variable by assuming nothing else changes.
What is the difference between positive and normative statements?
Positive statements: Objective, based on facts, and can be tested or proven true/false (e.g., ‘Raising taxes on alcohol will reduce demand’).
Normative statements: Subjective, based on value judgments or opinions (e.g., ‘The government should increase taxes on alcohol’).
How can you identify a positive statement?
Look for words like ‘will’ or ‘is.’ Positive statements are factual and testable (e.g., ‘Higher temperatures will increase demand for sun cream’).
How can you identify a normative statement?
Look for words like ‘should’ or statements suggesting one action is better than another. Normative statements are based on opinions or value judgments (e.g., ‘The free market is the best way to allocate resources’).
What are value judgments, and how do they influence economic decision-making?
Value judgments are subjective opinions about what is important or desirable. They influence economic decisions and policies because different economists may interpret the same data differently based on their values (e.g., interpreting inflation rates).
How do moral and political judgments influence people’s views on economic decisions?
People’s views on the best economic option are influenced by the positive consequences of decisions and their moral/political beliefs. For example, some may prioritize equality over efficiency based on their values.
Why is it important to distinguish between fact and fiction in current affairs?
Distinguishing between fact and fiction helps economists and policymakers make informed decisions based on evidence rather than misinformation or biased opinions.
How do economists use models?
Economists use models to simplify complex real-world scenarios. These models are based on assumptions and help analyze economic behavior and outcomes.
What is an example of a positive statement in economics?
‘Raising the tax on alcohol will lead to a fall in the demand for alcohol and a fall in the profits of pub landlords.’ This is testable and based on facts.
What is an example of a normative statement in economics?
‘The government should increase the tax on alcohol.’ This is based on opinion and suggests a preferred course of action.
How does thinking as an economist differ from other forms of scientific enquiry?
Economists rely on models and assumptions (e.g., ceteris paribus) rather than controlled experiments. They also deal with human behavior, which is less predictable than natural phenomena.
