MGT Notes

Reference, ‘Principles of Economics,’ by N. Gregory Mankiw, 3e, Pg 21

As we saw in the previous post, the study of economics closely follows a scientific method. Economists observe, theorize, collect data and test the interplay between theory and observation. However, they do face an obstacle unlike the natural sciences: experiments are difficult to conduct since economists are not allowed to manipulate a country’s economy. They are bound by available present and past data that the world has available and other natural experiments offered by history. An insight into the economy of the past is offered by historical episodes and they illustrate and allow the evaluation of economic theories of the present.