1.1.1 Economics as a social science

DEVELOPING MODELS

• economists develop models to explain how the economy works- they are built on assumptions used to simplify analysis but risk criticism for not being realistic enough.

THEORY VS MODEL

• there is no exact distinction between the two words.

• but theories can be expressed in words while models (because they require greater precision) are expressed in mathematical terms.

• purpose- to explain why something is as it is

• they’re simplified to make them more useful

ASSUMPTIONS

• assumptions are initial conditions made before a micro or macroeconomics analysis is built

• there are too many variables which can change within an economic model so assumptions must be made

CETERIS PARIBUS

• all sciences make assumptions when developing models and theories- allows them to simplify problems

• economists use the term ceteris paribus- latin to assume ‘all other things remain equal’ in an economic model

• economists will use this when looking at the relationship between 2 factors- assume only these 2 change and all other factors that would have an effect on any other variable remain the same

• helps them develop theories and models, and make predictions

SCIENTIFIC EXPERIMENTS

• economics is a social science (studies society and human behaviour) and so, unlike with natural science, it’s difficult to set up experiments to tests hypothesis.

• as the economist has to gather data in the everyday world, other variables are always changing it- difficult to decide whether evidence supports or disagrees with a hypothesis

• so they come up with different conclusions for a set of data

NOT SOCIAL SCIENCE?

• some argue economics is not a social science bc it studies human behaviour and that cannot be reduced to scientific law.

• but groups of individuals are more predictable than 1 individual- economists deal more with groups

• laws can’t be definite bc we don’t know exactly what each individual will do