The Economist As Scientist

The Economist As Scientist - The Economist As Scientist...

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The Economist As Scientist Work with the scientific method- the dispassionate development and testing of theories about how the world works The Scientific Method: Observation, Theory, And More Observation Same as scientists, but can not test the experiment like all other scientist Pay attention to natural experiments offered by history The Role of Assumptions Make assumptions Simplify the complex world and make it easier to understand Deciding which assumptions to make Use assumptions to answer different questions Economic Models Use models to explain the world: use diagrams and charts Our First Model: The Circular-Flow Diagram Circular-flow diagram A visual model of the economy that shows how dollars flow through markets among households. The economy is simplified to include only two types of decision markers Offers a simple way of organizing the economic transactions that occur between two households an firms in the economy Two loops: Inner loop: represents the flows of inputs and outputs
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The Economist As Scientist - The Economist As Scientist...

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