Economic Methodology

Question 1

Define social science

Answer 1

the scientific study of societies and social interaction. this includes how we make decisions, interact with each other and why we do things

Question 2

Is economics referred to as a social science?

Answer 2

yes

Question 3

State the similarities in methodology from natural sciences and economics

Answer 3

• same methodology is used (conduct research, collect data and use maths to create models and theories about the world)

Question 4

Define positive statement and state the features

Answer 4

a statement that can be tested using evidence to see if it can be true of false
- features: objective and fact based

Question 5

Define normative statement and state the features

Answer 5

a statement that involves a value judgement
and therefore cannot be tested to see if it is true of false.
features: subjective

Question 6

Define value judgement

Answer 6

your opinion of something

Question 7

How do value judgment influence economic decision making and policy

Answer 7

• policy decisions always come down to value judgement in the end.
• judgements can informed by looking at positive statements (evidence/ statistics) but the people in power always have to make the final value judgement/ decision based on their own personal opinions

Question 8

VALUE JUDGEMENT EXAMPLE: 2010 David Cameron - university tutorial fees:
State what decision David Cameron faced in 2010, link this to value judgement

Answer 8

in 2010 prime minister David Cameron, received data, predictions and evidence from government economists about how increasing university tuition fees will save tax payers every year. His final decisions was to help the tax payer and increase tuition fees.
- his decision was normative and based on value judgement

Question 9

Define moral and political judgement

Answer 9

• moral judgement- what is right or wrong when making decisions
• Political judgement - achievability and potential consequences when deciding what a government should do

Question 10

Can decisions be influenced by our moral and political judgement, yes or no?

Answer 10

yes

Question 11

State the four steps in creating an economic theory? (economics/ science methodology)

Answer 11

1. Observation
2. Forming a hypothesis (A hypothesis is a possible explanation for something you have observed. A hypothesis can be right or wrong)
3. Predictions (We make predictions from our hypothesis)
4. Test predictions

Question 12

When creating an economic theory, if the test is successful what happens?

Answer 12

the evidence will support the hypothesis and survive the test but more testing is required to see if the theory is reliable so that the economist can be confident that the hypothesis is correct. when the hypothesis is accepted by other economists then turns into a theory

Question 13

When creating an economic theory, if the test is not successful what happens?

Answer 13

hypotheses not supported by evidence are rejected. You will need to go back to step 2 (forming a hypothesis)

Question 14

State the differences in methodology from natural sciences and economics

Answer 14

• natural scientists - models and theories can be tested with precise experiments to see if they are right or wrong AND Economics - its difficult to test models because there are many different factors that can change.
• Natural scientists can make sure only one thing is changing by controlling other things like room temperature and noise AND economics - Economists use ceteris paribus to assume all other things are held constant, means economists can focus on one factor, the effects of one thing on its own

Question 15

Define ceteris paribus

Answer 15

all other things held constant whilst only one thing is changing

Question 16

define theory

Answer 16

an explanation that has survived tests and is supported by evidence