The Challenge of Establishing Causality in Economics

Economic Model

Positive and Normative Economics

Economic Models as Simplified Representations

Analyzing an Economic Claim

An economist creates a model to predict how a change in the price of gasoline affects the quantity of gasoline purchased by consumers. In this model, the economist assumes that consumer income, the price of public transportation, and the availability of electric cars all remain unchanged. Which fundamental methodological principle does this economist's assumption illustrate?

The Scientific Nature of Economics

Evaluating an Economic Conclusion

Because economists use sophisticated mathematical models and statistical analysis, their conclusions about cause and effect have the same level of certainty as those derived from controlled experiments in the natural sciences.

Match each methodological term used in economic inquiry with its corresponding description.

Arrange the following steps of a typical economic inquiry into the correct logical sequence, from the initial stage to the final one.

An economist observes a strong positive correlation between the number of ice cream shops in a city and the city's crime rate. Based on this observation alone, the economist concludes that the presence of ice cream shops causes an increase in crime. What is the most significant methodological flaw in this conclusion?

The Role of Simplification in Economic Inquiry

An economist aims to determine the causal effect of a new job training program on the wages of unemployed workers. A city randomly offers the program to 5,000 unemployed individuals (the treatment group) but not to another 5,000 (the control group). The economist will compare the average wages of both groups one year later. Which statement best evaluates the methodological soundness of this research design for establishing causality?