Economics as a Social Science

Economics as a social science content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.

Subtopics:
What is Economics?
Difficulties in conducting scientific experiments in economics

1. Economics as a Social Science Lower 6 th Micro Nature of Economics Mr O’Grady

2. What is Economics? Economics as a Social Science Mr O’Grady

3. What is Economics Economics: the study of how groups of individuals make decisions about the allocation of scarce resources, it is a social science. Social science: the study of societies and human behaviour using a variety of methods including the scientific method The Scientific Method: Uses abstract models to help explain how a complex, real world operates 3 steps: 1. Postulate a theory or model (put forward a hypothesis, capable of refutation) 2. gather evidence to support or refute the theory 3. accept, modify or refute the theory Models: Economists use models to simplify reality in order to improve our understanding of the world

4. Pros Forecast activities and help future analysis/ policy Gives a clear and mathematical representation of the data helps broad understanding Simplifies otherwise complex data answers become accessible Quickens the pace of analysis Helps to isolate the effect of a variable looks at causality (helps to consider which factors are relevant and irrelevant) Cons The bias of the creator of the model will then bias the results Assumptions may not be valid in different settings Models assumes complete rationality however individuals have bounded rationality Humans may not act in a different way despite the predictions of the model Output quality is determined by input quality Data and analysis may be overly simplified Incorrect results Pros and Cons of using models Assumptions The Role of Assumptions: Make the world easier to understand Assumptions allow Economists to make models to answer different questions Ceteris Paribus: Latin phrase meaning ‘all other things remaining equal’ An important assumption in economics because in the real world it is usually hard to isolate all the different variables

5. Difficulties in conducting scientific experiments in Economics Economics as a Social Science Mr O’Grady

6. 1. Lack of a sterile environment Economists can’t pause the economy to examine a specific element and hold all other areas constant. Economic experiments can be distorted by changes to other variables. Hard to establish a control group as very few economic agents are the same, e.g. not all cities or countries are comparable. It is hard to establish the impact of specific economic change. Economic agents have free will and imagination and so can react to the work of economists and change their behaviour. This creates new behaviours which then diminishes the accuracy of results. 2. Ethical Objections Even if economists could create a sterile economic environment, there are ethical problems in subjecting people’s lives to the whims of economists. Should economists be allowed to gamble with other people’s jobs, homes, and possessions for the sake of economic curiosity? Some believe that due to the diversity of human beings and the diverse conditions people face there are no universal rules or laws of behaviour to discover. Economists cannot predict and create laws of how every human allocates their resources. 3. No Universal Laws Of Human Behaviour Exist Difficulties in conducting scientific experiments in Economics

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