Chapter 1-Economics as a social science

What links the different sciences covering a wide field of knowledge?
The scientific method
What is the scientific method?
Postulates a theory-puts forward hypothesis capable of refutation (e.g. Earth is flat)
Gathers evidence to support/refute theory
Accepts, modifies or refutes the theory
What are theories which gain universal acceptance called?
Why is it hard to test theories in social sciences?
It is not possible to set up experiments to test hypotheses
It is not possible to establish control groups or to conduct experiments in environments which enable one factor to be varied whilst others are kept constant
What must an economist do to gather data?
They must gather data in the ordinary everyday world where many variables are changing over any given time period
It then becomes difficult to decide whether the evidence supports or refutes particular hypotheses
Why can’t economics be a science?
Because it studies human behaviour and human behaviour cannot be reduced to scientific laws
How could one argue that economics is predictable?
Because it studies groups, which are predictable
Laws can be stated just in forms of probabilities
What language can economists use to reflect the uncertainty of their predictions? “It is likely that”
“This may possibly happen”
What is the distinction between an economic theory and an economic model?
An economic theory is generally expressed in looser terms than a modeal
How are economic theories often expressed?
In mathematical terms to be more precise
Why are theories and models so useful in a science?
The universe is a constant space
Somehow we have to make sense of what is going on
We need to know why something is why it is
What is one criticism made of economics?
Economic theories and models are ‘unrealistic’
This is through it being a simplification of reality
What is an argument for models in economics?
Although they should not be followed precisely, they give a vague idea of what way the market will move
What does the extent of simplification within models depend upon?
If you’re trying to make a micro prediction the model should be very precise
If you’re making a macro prediction, the model can be more vague
How do economists simplify reality?
Ceteris Parabis condition
What is ceteris parabis?
Latin for all other things being equal
Give an example of ceteris parabis In demand theory, economists consider how price affects the amount demanded by buyers of a good
To isolate the price factor, they assume that all other factors that affect demand, such as income or price of other goods, remain unchanged
What two types of investigation is economics concerned with?
Positive economics
Normative economics
What is positive economics?
The scientific or objective study of economics
What is positive economics concerned with? Finding out how economies and markets actually work
What are positive statements?
Statements about economics which can be proven to be true or false
They can be supported or refuted by evidence
Give an example of a positive statement The UK economy is currently operating on its production possibility frontier
This is because they can investigate whether or not there are substantial unemployed resources
How can statements about the future be positive statements?
For example there will be growth by 5% over the next 5 years will be proved or refuted by the next 5 years
What is normative economics concerned with?
Value judgements
What does normative economics deal with?
The study of and presentation of policy prescriptions about economics
What is notable about normative statements?
They are ones which cannot be supported or refuted
What are normative statements ultimately?
Opinions about how economies and markets shouold work
What do economists tend to be interested in, in terms of statements?
Both positive and normative economics
They want to find out how economies work but they also want to influence policy debates
What does normative economics typically contain?
Positive economics within it in order to build up an argument
What do normative statements tend to contain?
Words like ‘should’ and ‘ought’
What is notable about the phrasing of positive statements?
It can contain ‘should’ and ‘ought’ for example the statement ‘inflation should reach 5% by the end of the year’
Define ceteris paribus
All things being equal; the assumption that, whilst the effects of a change in one variable are being investigated, all other variables are kept constant
Define law
A theory or model which has been verified by empirical evidence
Define normative economics
The study and presentation of policy prescriptions involving value judgements about the way in which scarce resources are allocated
Define normative statement
A statement which cannot be supported or refuted because it is a value judgement
Define positive economics
The scientific or objective study of the allocation of resources
Define positive statement
A statement which can be supported or refuted by evidence
Define scientific method
A method which subjects theories or hypotheses to falsification by empirical evidence
Define social science
The study of societies and human behaviour using a variety of methods, including the scientific method
Define theory or model
A hypothesis which is capable of refutation by empirical evidence
What was an argument for maintaining the union in the UK in the context of the Scottish independence referendum?
That the health of the UK retail sector depended upon the continuation of the union allowing for shoppers to shop across each border
What did 2014 net migration figures show about the UK?
That it went to 212000 in September 2012
EU immigration had increased and non-EU immigration had decreased
Why are foreign students important for universities?
They pay higher than average fees, subsidising UK students who pay lower fees