Economics as a Social Science (Edexcel A Level Economics A)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
The Process of Developing Models
Economics is a social science
It studies societies and the human interactions within those societies
Human interactions are complex and are influenced by many variables
Social sciences also include subjects such as Psychology, Politics, Geography and Business Studies
Due to the complexities within societies, economists build models so as to better understand certain interactions
A model is a simplified version of reality
Some models are more complex than others. For example, the Circular Flow of Income model seeks to demonstrate the interactions of all economic agents (firms, households, government, banks, international trade) within an entire economy
All models make a range of assumptions. These are often generalisations about behaviour, choices and likely outcomes
These assumptions are necessary so as to account for complex human behaviour and constantly changing variables
When evaluating different models, the underlying assumptions should always be considered
To think like an economist involves identifying which variables will be studied and which ones will be excluded
It considers the type of relationship between variables (causal or correlation). For example, data shows that when ice cream sales increase, so do car thefts. Correlation, yes. Causation, no
Some economists will build an argument to include certain variables in a study and others will argue to exclude them. They will each provide a justification for their decision
Two economists analysing the same data may end up with vastly different interpretations. This is often due to the different variables that each economist chooses to focus on. This is the complexity found within social sciences
The Use of Ceteris Paribus
Due to the large number of variables that can influence any particular economic interaction in society, economists create models using the principle of ceteris paribus
Translated from Latin, ceteris paribus means 'all other variables remain constant'
It allows economists to simplify and explain causes and effects, even if the explanation is somewhat limited by the assumptions
For example, there are many factors that affect the level of unemployment in an economy (interest rates, consumer confidence, firms investment, government policies etc.). However, using ceteris paribus, economists can simplify the economic model to analyse just two variables (unemployment and interest rates). The analysis is conducted ceteris paribus. All the other variables remain constant, even when they are highly likely to have changed
The Inability to Make Scientific Experiments
The natural sciences use the scientific method to prove a relationship between two variables
Briefly explained, the scientific method includes the following steps
Define a question to investigate
Develop a hypothesis (make a prediction)
Conduct a test
Gather data
Analyse the data
Report the conclusions
If the relationship between two variables is proven, then as long as the test conditions are replicated, the conclusions to that experiment should be the same anywhere in the world.
The social sciences use a variation of this method called the social scientific method as there is an inability to make scientific experiments the results of which can be proven time and time again
This is due to the complexity of human nature and the significant number of social interactions that are taking place in any economy at any given point in time
The steps in the social scientific method are similar but there is a key difference
Define a question to investigate
Develop a hypothesis using ceteris paribus (make a prediction)
Conduct empirical research
Gather data
Analyse the data
Report the conclusions
Empirical research is collected through observations, surveys, opinion polls etc.
The results of the same hypothesis can vary significantly when conducted by different researchers at different time periods and between different places and cultures
Economic models are developed by economists once a hypothesis has been repeatedly proven or rejected in different circumstances.
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