1、Consider how assumptions and models can shed light on the world Lear n two simple modelsthe cir cular flow and the pr oduction possibilities fr ontier Distinguish between micr oeconomics and macr oeconomics T H I N K I N G L I K E A N E C O N O M I S T Every field of study has its own language and i
2、ts own way of thinking. Mathe- maticians talk about axioms, integrals, and vector spaces. Psychologists talk about ego, id, and cognitive dissonance. Lawyers talk about venue, torts, and promissory estoppel.Economics is no different. Supply, demand, elasticity, comparative advantage, consumer surplu
3、s, deadweight lossthese terms are part of the economists lan- guage. In the coming chapters, you will encounter many new terms and some fa- miliar words that economists use in specialized ways. At first, this new language may seem needlessly arcane. But, as you will see, its value lies in its abilit
4、y to pro- vide you a new and useful way of thinking about the world in which you live.The single most important purpose of this book is to help you learn the econ- omists way of thinking. Of course, just as you cannot become a mathematician, psychologist, or lawyer overnight, learning to think like
5、an economist will take19 Lear n the dif f er ence between positive and nor mative statements Examine the r o le of economists in making policy Consider why economists sometimes disagr ee with one another some time. Yet with a combination of theory, case studies, and examples of eco- nomics in the ne
6、ws, this book will give you ample opportunity to develop and practice this skill.Before delving into the substance and details of economics, it is helpful to have an overview of how economists approach the world. This chapter, therefore, dis- cusses the fields methodology. What is distinctive about
7、how economists confront a question? What does it mean to think like an economist?THE ECONOMIST AS SCIENTIST Economists try to address their subject with a scientists objectivity. They approach the study of the economy in much the same way as a physicist approaches the study of matter and a biologist
8、 approaches the study of life: They devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.To beginners, it can seem odd to claim that economics is a science. After all, economists do not work with test tubes or telescopes. The essence of science,
9、“Im a social scientist, Michael. That means I cant explain electricity or anything like that, but if you ever want to know about people Im your man.”however, is the scientific methodthe dispassionate development and testing of theories about how the world works. This method of inquiry is as applicab
10、le to studying a nations economy as it is to studying the earths gravity or a species evolution. As Albert Einstein once put it, “The whole of science is nothing more than the refinement of everyday thinking.”Although Einsteins comment is as true for social sciences such as economics as it is for na
11、tural sciences such as physics, most people are not accustomed to looking at society through the eyes of a scientist. Lets therefore discuss some of the ways in which economists apply the logic of science to examine how an econ- omy works.THE SCIENTIFIC METHOD: OBSERVAT ION, THEOR Y, AND MORE OBSERV
12、AT ION Isaac Newton, the famous seventeenth-century scientist and mathematician, al- legedly became intrigued one day when he saw an apple fall from an apple tree. This observation motivated Newton to develop a theory of gravity that applies not only to an apple falling to the earth but to any two o
13、bjects in the universe. Subse- quent testing of Newtons theory has shown that it works well in many circum- stances (although, as Einstein would later emphasize, not in all circumstances). Because Newtons theory has been so successful at explaining observation, it is still taught today in undergradu
14、ate physics courses around the world.This interplay between theory and observation also occurs in the field of eco- nomics. An economist might live in a country experiencing rapid increases in prices and be moved by this observation to develop a theory of inflation. The theory might assert that high
15、 inflation arises when the government prints too much money. (As you may recall, this was one of the Ten Principles of Economics in Chapter 1.) To test this theory, the economist could collect and analyze data on prices and money from many different countries. If growth in the quantity of money were
16、 not at all related to the rate at which prices are rising, the economist would start to doubt the validity of his theory of inflation. If money growth and in- flation were strongly correlated in international data, as in fact they are, the econ- omist would become more confident in his theory.Altho
17、ugh economists use theory and observation like other scientists, they do face an obstacle that makes their task especially challenging: Experiments are often difficult in economics. Physicists studying gravity can drop many objects in their laboratories to generate data to test their theories. By co
18、ntrast, economists study- ing inflation are not allowed to manipulate a nations monetary policy simply to generate useful data. Economists, like astronomers and evolutionary biologists, usually have to make do with whatever data the world happens to give them.To find a substitute for laboratory expe
19、riments, economists pay close attention to the natural experiments offered by history. When a war in the Middle East in- terrupts the flow of crude oil, for instance, oil prices skyrocket around the world. For consumers of oil and oil products, such an event depresses living standards. For economic
20、policymakers, it poses a difficult choice about how best to respond. But for economic scientists, it provides an opportunity to study the effects of a key natural resource on the worlds economies, and this opportunity persists long after the wartime increase in oil prices is over. Throughout this bo
21、ok, therefore, we con- sider many historical episodes. These episodes are valuable to study because theygive us insight into the economy of the past and, more important, because they al- low us to illustrate and evaluate economic theories of the present.THE ROLE OF ASSUMPTIONS If you ask a physicist
22、 how long it would take for a marble to fall from the top of a ten-story building, she will answer the question by assuming that the marble falls in a vacuum. Of course, this assumption is false. In fact, the building is surrounded by air, which exerts friction on the falling marble and slows it dow
23、n. Yet the physi- cist will correctly point out that friction on the marble is so small that its effect is negligible. Assuming the marble falls in a vacuum greatly simplifies the problem without substantially affecting the answer.Economists make assumptions for the same reason: Assumptions can make
24、 the world easier to understand. To study the effects of international trade, for ex- ample, we may assume that the world consists of only two countries and that each country produces only two goods. Of course, the real world consists of dozens of countries, each of which produces thousands of diffe
25、rent types of goods. But by as- suming two countries and two goods, we can focus our thinking. Once we under- stand international trade in an imaginary world with two countries and two goods, we are in a better position to understand international trade in the more complex world in which we live.The
26、 art in scientific thinkingwhether in physics, biology, or economicsis deciding which assumptions to make. Suppose, for instance, that we were drop- ping a beach ball rather than a marble from the top of the building. Our physicist would realize that the assumption of no friction is far less accurat
27、e in this case: Friction exerts a greater force on a beach ball than on a marble. The assumption that gravity works in a vacuum is reasonable for studying a falling marble but not for studying a falling beach ball.Similarly, economists use different assumptions to answer different questions. Suppose
28、 that we want to study what happens to the economy when the govern- ment changes the number of dollars in circulation. An important piece of this analysis, it turns out, is how prices respond. Many prices in the economy change infrequently; the newsstand prices of magazines, for instance, are change
29、d only every few years. Knowing this fact may lead us to make different assumptions when studying the effects of the policy change over different time horizons. For studying the short-run effects of the policy, we may assume that prices do not change much. We may even make the extreme and artificial
30、 assumption that all prices are completely fixed. For studying the long-run effects of the policy, how- ever, we may assume that all prices are completely flexible. Just as a physicist uses different assumptions when studying falling marbles and falling beach balls, econ- omists use different assump
31、tions when studying the short-run and long-run ef- fects of a change in the quantity of money.ECONOMIC MODELS High school biology teachers teach basic anatomy with plastic replicas of the hu- man body. These models have all the major organsthe heart, the liver, the kid- neys, and so on. The models a
32、llow teachers to show their students in a simple way how the important parts of the body fit together. Of course, these plastic modelsare not actual human bodies, and no one would mistake the model for a real per- son. These models are stylized, and they omit many details. Yet despite this lack of realismindeed, because of this lack of realismstudying
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