ECON 110 Lecture Notes - Scientific Method

46 views2 pages
19 Nov 2012
Positive versus Normative
Positive statements
statements of what “is” or “was” or “will be”
right and wrong
increase in min wage leads to higher youth unemployment
taxing carbon emissions reduces carbon emissions
Normative statements
statements of what “should be”
value judgements
no right or wrong
based on “positive” evidence
we should increase the minimum wage
we should tax carbon emissions
Disagreements in Economics
can be based on the positive
is this the right model to analyze the phenomenon/question being studied?
does the empirical analysis really test the positive proposition
but also on the normative
differences in value judgements over the relative importance of various (possibly competing)
policy goals.
Economic theories
economics is a social science
as such it adheres to the scientific method
theories are proposed, tested, and modified or discarded as indicated – continual process.
given the complexity of the economy, economists use models to describe theories
mathematical/diagrammatic models.
Empirical models – built to analysis data.
Endogenous variables – values that are determined within model.
Exogenous variables – values that affect the model, but are not effected by the model.
Testing Economic theories
test a theory by comparing its predictions with evidence from the real world
empirical observations – econometrics
experimental economics
must be careful to make the distinction between causation and correlation
NFC wins the Super Bowl, stock prices rise the next year.
Unlock document

This preview shows half of the first page of the document.
Unlock all 2 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.