Economics as a Science

A scientist will

• Postulate a theory – the scientist will develop and put forward a hypothesis capable of refutation.
• Gather evidence to support or reject the theory. This might be done through experimentation or modelling
• Accept, modify or refute the theory.

Theories which gain universal acceptance are often referred to as LAWS.

Social Sciences

Social sciences include economics, sociology, politics, anthropology and ethnomusicology. These sciences are common in that it is difficult to establish experiments to test a hypothesis. The economist has to gather information in the ordinary everyday world where many variables are changing over any given time period. When interpreting data economists can come to different conclusions, for example if the unemployment level in the north of England was 12% and the national average 8% it might be argued that government policy is actually successful and unemployment in that region would be worse without the current level of intervention.

Economics is based on the study of the behaviour of groups of individuals or firms which is often far more predictable than the behaviour of individuals.

Positive and Normative Economics

POSITIVE ECONOMICS: deals with the objective or scientific explanations of the economy, and therefore the allocation of resources. For example, the statement that as the price of petrol rises, its demand will fall is positive. Positive economics is a statement of what happens when something occurs. It contains no value judgements and is often referred to as being value-free.

NORMATIVE ECONOMICS: Attempts to describe what should happen. It will contain a value judgement. A normative model will set a standard by which reality can be judged. For example, “The government has a duty to protect the incomes of everybody in society not just the well off” is normative. It contains a value judgement about the role of government.

Economists often are trying to deal with normative questions such as how best can the economy help the poor? However it is often difficult to distinguish between normative and positive economics. For example any attempt to answer a normative question requires an understanding of positive economics. For example, “Society should reduce unemployment”, however to reach that objective economists must know how to manipulate the economy to reduce unemployment.