Nature and Method Of Economics

Topics: Economics, Economy, Political economy Pages: 29 (3614 words) Published: October 2, 2014
19/08/2014

Economics of Accounting
Professionals (ECON910)
Kankesu (Jay) Jayanthakumaran
Lecturer/Tutor:
Chris Keane

1

Chapters 1&2
Chapter 1: The nature and method
of economics

Copyright © 2011 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Microeconomics 9e by Jackson, McIver & Wilson

1-2

1

19/08/2014

The roles of economics
• Economics is concerned with the efficient use
of limited productive resources for the purpose
of attaining the maximum satisfaction of our material
wants.
• Why study economics? John Maynard Keynes
offered this response:
‘The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some

defunct economist.’
Keynes, 1936

Copyright © 2011 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Microeconomics 9e by Jackson, McIver & Wilson

1-3

The Age of the Economists






Adam Smith (1776 landmark book The Wealth of Nations)
David Ricardo (1817 Principles of Political Economy and taxation) John Stuart Mill (1848 Principles of Political Economy)
Copyr
Karl Marx (1847 Wage-Labour and Capital)
ight
2004
John Maynard Keynes (1936 The General Theory of
McGr
Employment, Interest and Money)

• plus many modern contributors

4

awHill
Austr
alia
Pty
Ltd
PPTs
t/a
Micro
econo
mics
7/e by
Jacks
on
and
McIve

2

19/08/2014

The roles of economics
• Economics for citizenship
– To create well-informed members of society.

• Economics in business
– To provide business with strategic information and
interpretations.

• Personal applications
– To assist individuals, as workers and income receivers,
to gain and retain economic security.

Copyright © 2011 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Microeconomics 9e by Jackson, McIver & Wilson

1-5

Methodology of economics
• What do economists do? What are their goals? What
methods do they use?
– Economists derive economic principles that are useful in formulating policies designed to solve economic problems.

• The methods used by economists are:
1. Facts — descriptive or empirical economics concerned
with gathering facts relevant to an economic problem.
2. Principles or theories — economists generalise about
economic behaviour formulating economic theory.
3. Policies — formulating policies for correcting the problem under scrutiny called applied economics.
Copyright © 2011 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Microeconomics 9e by Jackson, McIver & Wilson

1-6

3

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Induction and Deduction
• Induction (Facts –Induction-Theory- Policy)
– A method of reasoning that proceeds from facts to
generalisations

• Deduction (Testing theories by facts)
– Reasoning from assumptions to conclusions by testing
a hypothesis
– Both are complementary.

Copyright 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
7

Slides prepared by Muni Perumal, University of Canberra, Australia.

Descriptive economics
• Complex in economics unlike physical sciences
– Economics is a social science involving the
complexities of individuals and institutions
– Facts are difficult to gather and interpret
– Economists must use discretion in collecting data, and
must distinguish economic from non-economic facts.

Copyright © 2011 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Microeconomics 9e by Jackson, McIver & Wilson

1-8

4

19/08/2014

Economic theory
• Facts must be arranged systematically, interpreted
and generalised to derive appropriate economic
theory.
• Theories or principles are the end result of economic
analysis. These are meaningful statements drawn
from...
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