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 6th 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

7. Where next?
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