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ECONOMICS AS A

SOCIAL SCIENCE
Comparison of Scientific Method.
Also Why Economists Disagree

Scientific Method
Economics is a social science meaning that it
uses scientific method to study human
behaviour. Scientific method involves the
following series of steps:
1.Making observations.
2.Inventing a tentative explanation of the
observations. This is known as a hypothesis.
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Scientific Method
3.Using the hypothesis to make predictions
4.Testing the predictions by experiment, or by
making further observations
5.If the predictions are accurate, the
hypothesis becomes a theory. If not, then the
hypothesis must be rejected or at least
modified in favour of more successful
hypotheses.
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Observation
Hypothesis
If
unsuccessful

Prediction
Test
If successful

Theory
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Scientific Theories
Scientific theories stand or fall on their ability
to make useful predictions. They are not based
on the political or religious authority of the
person proposing the idea.
The philosopher Karl Popper (1902-1994) taught
us that the only useful scientific theories are
those that are capable of being falsified. A
scientific theory can never be proven to be true.
There is no absolute truth in science.
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Scientific Theories
A scientific theory is a logically coherent and
predictive system that has been tested against
experiment or observation. It explains
observable phenomena and makes falsifiable
predictions about them.
- Krauss

Advances in Science
Scientific advances are often the result of
improvements in technology allowing more
accurate observations to be made; e.g. 19th
century improvements in microscopes led to
the discovery of the cause of infectious
disease.
Similarly, the use of computers has allowed
economists to handle large sets of data, and
this has led to a better understanding of the
economy.

Advances in Science
Scientific advance allows false or inaccurate
hypotheses and theories to be rejected.
The best scientific theories are those which:
Make the most accurate predictions
Do so in the simplest way possible. Simple
theories are always preferred to more complex
ones, providing they give useful predictions.
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Why do Economists
Disagree?
Economists have a reputation for disagreeing
with one another.
Firstly, this is somewhat unfair; most
economists agree on most aspects of
economic theory, and this is more so now
than it was 30 years ago. Many disagreements
are the result of misperceptions.
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What do you
see in this
picture?

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Or this?

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Why Economist Disagree


1.Misperceptions
The world is a complex place, and all our
perceptions (observations) are filtered by our
past experiences. Some disagreements are the
result of different economists concentrating
on different and incomplete pieces of
information, rather like the
fable of the blind men and the elephant.
In this respect, economics is no different from
many other sciences.
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Scientific Laws
The invention of the scientific method is the
most important intellectual idea, the most
powerful framework for thinking and
investigating and understanding and challenging
the world around us that there is, and it rests
on the premise that any idea is there to be
attacked. If it withstands the attack then it
lives to fight another day, and if it doesnt
withstand the attack then down it goes.
Douglas Adams, quoted in Dawkins, R. (2004)
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Misperceptions
This is the reason why this course puts so
much emphasis on developing the skill of
writing evaluative essays.
A good evaluative essay will show the ability
to perceive a problem from more than one
point of view, and make useful criticisms of
each. By doing so it gets closer to a full
understanding of the issue.
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Why Economists Disagree


2. Normative Judgements
A second important reason for disagreements
in economics (and in other social sciences) is
the normative aspect of much of economics.
knowledge of how things are, can never
supplant the obligation to justify our
preferences for how they should bethe
physics of society is, and can only ever be a
tool and never a moral compass (Ball, 2004,
p. 583)
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2. Normative Judgements
Human action must be guided by facts, but
also by what is considered ethical or morally
correct.
Without the science, morality is blind; but
without the morality, science is useless,
pointless and paralytic (Olson, quoted in
Ball, 2004, p.579)

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Economic Models
In order to simplify a complex world,
economist use models.
A model in science is a simplification of
reality. It focuses upon the most important
elements in order to aid understanding.
A map is a good analogy. A map shows just
the most important features of the landscape
so that we can find our way around.
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A Microeconomic Model
Capital goods

The Production Possibility Frontier

Source: Sloman, 2004

C
B

Consumer goods
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The Production Possibility


Frontier
The Production Possibility Frontier [PPF] or
Curve, illustrates the economic concepts of
scarcity and choice.
Producing more consumer goods [A to B] has
an opportunity cost of reduced output of
capital goods.
Point D is unobtainable due to resource
scarcity.
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The Circular Flow of Income

Factor
Payments
(Y)

Firms

Consumption of
domestically
produced goods
and services
(C)

A Macroeconomic Model
Households
Source: Sloman, 2004

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A Macro-economic Model:
Circular Flow of Income
This model illustrates the idea that the
spending of households is the income of
firms, and the spending of firms on factors of
production is the income of households
[wages, profits etc.]

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References
Ball, P. (2004) Critical Mass: How One Thing
Leads To Another, Arrow Books, London
Dawkins, R., (2004), A Devils Chaplain, Orion
Books, London
Krauss, L. New Scientist, 3/12/05
Sloman, J. (2004), Essentials of Economics,
Pearson Education Ltd., Harlow
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