The Foundations of Economics

The Foundations of Economics - The Foundations of Economics...

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The Foundations of Economics
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Economics: The scientic method (1) guiding the process of discovering the incentives (2) that govern the behavior of individuals (4) in the context of the society (3) they construct.
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Scientific Method (1) Economic models are a simplfied view of the world. I We make models easier to understand with simplifying assumptions. I think therefore I am. ~ Descartes
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Scientific Mehod(1) Ceteris paribus: (Latin) "All other things equal." I Theories must have empirically tested and supported hypotheses. I Positive Analysis: Analysis concerned with what is. I No room for subjective opinion. I Economics is primarily positive analysis. I Normative Analysis: Analysis that is concerned with what ought to be. Can depend on personal values.
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Example: Positive vs. Normative Statement: For every $1 increase in the minimum wage, on average the U.S. will experience an immediate 1% increase in the unemployment rate. (Positive)
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This note was uploaded on 06/01/2010 for the course COMM 308 taught by Professor Durbin during the Spring '10 term at WVU.

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The Foundations of Economics - The Foundations of Economics...

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