Economics as an inexact science - The hypothetico-deductive approach
3 important questions on Economics as an inexact science - The hypothetico-deductive approach
Describe the hypothetico-deductive method.
1. Formulation of hypotheses.
2. Derivation of testable predictions.
3. Test the prediction.
4. Evaluate the test results.
2. Derivation of testable predictions.
3. Test the prediction.
4. Evaluate the test results.
What are the core assumptions? (formulation of hypotheses)
- Consumers are rational.
- Consumerism.
- Diminishing marginal rates of substitution.
- Consumerism.
- Diminishing marginal rates of substitution.
Derivation of testable predictions, additional assumptions (Hausman):
- institutional assumptions --> type of market
- epistemic assumptions --> knowledge that economic agents posses about prices, quantities, etc
- other simplifying assumptions
- ceteris paribus clauses
- epistemic assumptions --> knowledge that economic agents posses about prices, quantities, etc
- other simplifying assumptions
- ceteris paribus clauses
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