1.2 Economic Methodology

2026 📋 Syllabus Objectives

By the end of these notes, you should be able to:

  1. Explain what economics is and why it is called a social science
  2. Distinguish between positive statements (facts) and normative statements (value judgements/opinions)
  3. Explain the meaning of the term ceteris paribus
  4. Explain the importance of time periods in economics — the short run, long run, and very long run

📚 Main Content

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Objective 1: Economics as a Social Science

What is a Science?

A science is a subject that studies the world by:

  • Asking questions and forming hypotheses (educated guesses about how something works)
  • Testing those hypotheses using evidence and data
  • Drawing conclusions based on what the evidence shows
  • Being objective — meaning the findings are based on facts, not personal feelings

What is a Social Science?

A social science is a type of science that studies human behaviour and how people interact with each other and with the world around them. Other social sciences include psychology, sociology, and politics.

Economics is a social science because it studies how people, businesses, and governments make decisions about scarce resources — resources that are limited and not enough to satisfy everyone's wants.

Why is Economics a Science?

Economists behave like scientists. Here is how:

  • They observe the real world — for example, they notice that when the price of a product goes up, people tend to buy less of it.
  • They form a hypothesis — for example, "If the price of bread rises, people will buy less bread."
  • They test the hypothesis using real data — they collect information on prices and sales figures to see if the pattern holds.
  • They draw conclusions — if the data supports the hypothesis, it becomes accepted as an economic principle or law.

What Makes Economics Different from Natural Sciences?

Natural sciences (like physics or chemistry) can run controlled experiments in laboratories. For example, a chemist can mix two chemicals and observe exactly what happens in a controlled environment.

Economics is more difficult to test in this way because:

  • Economists study human behaviour, and humans do not always act in predictable or logical ways.
  • It is impossible to run a controlled experiment on an entire economy — you cannot, for example, test the effect of raising taxes by "pausing" the real world and changing just one thing.
  • Many factors change at the same time in the real world, making it hard to isolate the effect of just one variable (one factor).

This is why economists use models — simplified pictures of the real world that help them understand how economies work. A model focuses on the most important factors and ignores less important details.

Example: The supply and demand model is a simplified tool economists use to predict how prices change. It does not capture every detail of the real world, but it is very useful for understanding market behaviour.

Economics Tries to be Scientific

Even though the real world is complex, economists aim to:

  • Use evidence rather than guesses
  • Be logical and systematic in their thinking
  • Separate facts from opinions (more on this in Objective 2)

This is what makes economics a science — even though it is not a perfect or exact science like mathematics.

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