The Nature of Economics

Scientific Method - a method which subjects theories or hypothesis to falsification by empirical evidence. (1. Hypothesis, 2. Evidence, 3. Accept, Modify or Refute.)

Theory - a hypothesis which is capable of refutation by empirical evidence.

Law - a theory or model which has been verified by empirical evidence.

Social Science - the study of societies and human behaviour using a variety of methods, including the scientific method.

• Difficult to gather evidence to support or refute a theory as experiments can't easily be held.
• Relies on evidence in ordinary life which has constantly changing variables making it difficult.
• Economists also reach different conclusions when looking at a particular set of data.
• It is difficult to understand and predict human behaviour.
• Economics studies groups of individuals which is easier to predict and understand.
• Changing variables makes making a definite conclusion impossible. ('It is likely that'.)

Model - a hypothesis which is capable of refutation by empirical evidence.

• A 'theory' and a 'model' is essentially the same thing.
• Models are more specific than theories. (Models tend to be in mathematical terms.)
  
• All theories and models are simplifications of reality, including models from normal sciences.
• Theories and models make assumptions of other variables in order to be useful.
• Some factors must be ignored in order for theories and models to make sense.

Ceteris Paribus - all things being equal; the assumption that, whilst the effects of a change in one variable are being investigated, all other variables are kept constant.

• Assumptions are made to simplify issues so they're easier to solve.
• Economists adopt the ceteris paribus condition.
• Essentially they assume that all other factors remain unchanged.