Economics as a social science
• Objectives
• To understand the concept ceteris paribus
• To understand the difference between positive and normative
statements
Homework: Explain the difference between positive and
normative statements using examples from a current article of
your choice.
‘Free school meals for children at infant school will
reduce the cost burden in the future for the NHS’.
Brainstorm the assumptions which might underlie this
economics argument.
Do you think this statement is false? Why?
Economic Study
• Economics is a social science - a subject concerned
with human behaviour
• Theories are difficult to study because:
- many things may change simultaneously
- events can not be tested in labs
• Economists try to isolate singular events by saying
‘all other things remaining equal’ or ‘ceteris
paribus’
In essence,
Ceteris Paribus
allows us to
make
predictions
with confidence
about Hootie’s
behavior
during a walk,
regardless of
the
environment or
circumstances.
‘Free school meals for children at infant school will reduce the cost
burden in the future for the NHS’.
But there might
be an outbreak
of a virus in
infant schools
The population may get
even older and therefore
burden the NHS
There may be a war that
starts that burdens the
NHS
http://study.com/academy/lesson/the-concept-of-ceteris-paribus-in-economics.html
But that’s not the case….
• Ceteris paribus is an essential part of basic economic theory.
• And if you, a hapless student of economics, refuse to believe in the
existence of the Ceteris Paribus Fairy, you'll doubtlessly end up
thinking too much about what else could happen in the situation at
hand.
• It's a flaw most smart, logically-thinking people fall into. On
economics exams, it often results in wrong answers and bad exam
grades.
Economic Study
• Economic models are developed to illustrate
economic events by isolating individual relationships
– these are then used to make forecasts about how
one event will affect others in the future
• Eg. If prices for chocolate rise, we will buy less
chocolate and more crisps?
• Eg. If prices for chocolate rise, will farmers grow more
Cacao?
Why Do Economists Disagree?
• Different opinions about who should be included
in economic statistics
• Technical, cultural, & social changes affect
behaviour and its interpretation
• Views differ on what policies should be carried out
to affect the economy in the desired way
Positive v. Normative Statements
• Positive Statements
“statements of fact that
can be proven using
relevant data”
- disagreements are settled
by looking at the data
More aid should go
to developing
countries.
Hong Kong is now
part of China.
• Normative Statements
“value judgements that
involve opinion and
cannot be proved right or
wrong”
- disagreements are settled
by votes
Positive v Normative Statements
Read this article and highlight the positive statements in red and
normative statements in green.
Take this quiz:
• http://beta.tutor2u.net/economics/blog/zondle-game-positive-andnormative-statements
Complete the
worksheet