ECON 222 Lecture Notes - Lecture 2: Scientific Method
Document Summary
Key ideas: a model is a simplified description of reality, economists use data to evaluate the accuracy of models and understand how the world works, correlation does not imply causality, experiments help economists to measure cause and effect. Economic research focuses on questions that are important to society and can be answered with models and data. The scientific method (also referred to as empiricism) is composed of two steps: developing models that explain some part of the world, testing those models using data to see how closely the model matches what we actually observe. Two important features of models: they are not exact. Not everyone will see his or her wages increase by 10% with every additional year of education: they generate predictions that can be tested with data, omitted variables. If we ignore something that contributes to cause and effect, then that something is an omitted variable. A correlation might not make sense until the omitted variable is added.
