Lecture 2 - I. Economics as a social science a. Social i....

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Economics as a social science a. Social i. About human beings b. Science i. We use scientific methodology ii. Come up with a theory of how people behave (in our case, how people make decisions how to allocate with scarcity) iii. Make a hypothesis, run an experiment (tough to do in economics, because humans know when they are being experimented on) 1. Can’t experiment on taxes 2. Can’t experiment on vouchers (unconstitutional) iv. THEREFORE: economists work on theories c. Theories- Three Rules i. Simple 1. Easier to understand ii. General 1. Applies to a wide range of applications 2. Better the more general they are iii. Useful 1. At making predictions about behavior in the future, when things change 2. What stocks did, why they moved certain ways are what shows concentrate on, but that does not mean anything, it is more important to know what would happen in the future iv. Theories are not always perfect, it is the real world, but they will work a lot. II. Free Trade
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Lecture 2 - I. Economics as a social science a. Social i....

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