Methodology

What do economists do? What procedures do they employ? The economist must first gather the facts which are relevant to consideration of a specific economic problem. Then the economics puts this collection of facts in order and summarizes them, and finds out a principle concerning the way individuals and institutions actually behave. Deriving principles from facts is called “economic theory” or “economic analysis”. Finally, the genera l knowledge of economic behavior which economic principles provide can then be used in developing policies for correcting or avoiding the problem. This final aspect of the field is called “applied economics” or “policy economics”. In this way economic theory serves as the basis for economic policy. Economic principles are extremely valuable as predictive devices. If some undesirable event (such as unemployment or inflation) can be predicted or understood through economic theory, we may be able to influence or control the event, or prepare for it. Ability to predict a rainstorm does not give us control over the weather, but it does permit us to prepare for it by carrying a raincoat and an umbrella.

Picture 1.1 Economic analysis.

Дата добавления: 2014-01-03