Economic methods are the principles underlying the economic reasoning. Such methods are concerned with the scientific explanation of economics and the relation between different economic factors. By using the methodology in economics, specialists are able to determine the outcomes of certain conduct by countries and explore the developments on a domestic and global level. Main methods in are experimental, mathematical, economic framework and comparative statics.
The Economic Framework
The economic framework is a main method used for the separation of the study of economics. It provides distinction between certain areas of economics. The modern economic thought recognizes the separation between macro- and micro-economics. The first is concerned with the larger issues and principles of economics -- economic growth, unemployment, national income and so on. The latter relates with studying particular, more narrow spheres of economics -- for example, market competition, demand and supply, policies having direct economic impact. The economic framework method is essential for the modern economic reasoning as it divides the economic thought into more comprehensive areas of study.
Experimental economic methods are concerned with applying economic data to test the validity of statements related to future economic developments. For example, if companies expect an increase in the demand for a certain product, economists would take data about the current and future condition of this particular production and would apply it to the current interest the public has toward this product. Thus they can estimate predicted prices and demand for the product. A working paper by economist Daniel Kahneman from the Royal Swedish Academy of Science indicates that this approach is relatively new and that it is now used to determine real-time changes in the economic environment in countries.
Mathematical economics is the method of using mathematics in calculating economic variables. The method embraces a huge variety of mathematical equations that aim to determine the current and future state of an economy. For example, mathematical economic methods are used to determine the unemployment rates in a country. Through a fixed mathematical framework, economists can expect either a decrease or an increase in the rates of unemployment and can advise decision makers on actions to reduce the impact of upcoming employment problems.
As Harvard economist Susan Athey has described it in her early draft works, comparative statics is the economic method which compares two economic outcomes before and after a change in the economy. It is particularly useful when determining the demand and supply rates, when analyzing the whole economy or when estimating impacts of monetary policies. For example, while using comparative statics, an individual can observe the change in the computer industry. Using data before the tablet innovations and after tablets appeared on the markets for the fist time in 2009, it is logical to conclude that their demand in the future would increase because of the increasing public interest and rising amounts of tablet sales.
Nikolay Danev began writing professionally in 2009. He has published articles on the United Kingdom, the European Union, political and legal issues, science, sociology, economics and other topics on various websites. Danev is currently a law student at Brunel University in West London.