EC120 Lecture 2: Lecture 2: Economic Theories Data, and Graphs

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21 Oct 2018
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Depend on value judgements and cannot be evaluated by a recourse to facts. A normative statement is about what ought to be. A positive statement is about what actually is, was, or will be. Economists often disagree with each other in public discussions- often because of poor communication of failure to acknowledge the full state of their ignorance. Many public disagreements are based on the positive/ normative distinction. A responsible economist states clearly which part of proffered advice is normative and what part is positive. A theory is an abstraction from reality. A theory consists of variables, assumptions, and predictions. A theory is tested by confronting its predictions with evidence. Theories in conflict in with fact amend to be consistent with those facts. The scientific approach is central to the study of economics. A theory is tested by confronting its predictions with empirical evidence.

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