METHODS OF DRIVING ECONOMIC LAWS

METHODS OF DRIVING ECONOMIC LAWS

         Economists have adopted two methods of investigation. Regardless of whether they are natural or social, they are known as the deductive and inductive methods.

DEDUCTIVE METHODS: Deductive comes from the word deduce, which means to infer by logical reasoning or in other words to conclude from known facts or general principles. This method is also known as an analytical abstract a prior method. According to deductive method, we start from general observation, and end up at particular generalization. For example, the general indisputable facts of human nature are that people buy more of a commodity from the market which sells at a lower price and seller increase the supply of a commodity at a higher price. These facts have led to particular inferences called laws of demand and supply. This method of interest, they are well reputed classical economists e.g. J.S MILL, David Ricardo and senior etc.

         In brief, according to deductive method, we make use indisputable facts of human nature and draw concrete inference called economic laws. In order to use this method of investigation the following steps are taken:

      (1) SELECTION OF GENERAL INDISPUTABLE FACTS OF LIFE.

     (2) TO DRAW CONCRETE INFERCES.

    (3) TESTING THE VALIDITY OF THE INFERNCES.

    (4) TO DEVELOP CO-RELATIONSHIP BETWEEN THE FACTS AND THE INFERNCES.

        Whereas the derivation of inferences from general truth is concerned, this method is the best. It is simple, precise and effective. It saves a lot of time and therefore it can be considered Economical in one way or the other.

      However, it has its demerits too. This method is known as the abstract method. The word abstract means (a) existing only in concept and to in really (b) concerned with or restricted  to theories. This means that the method is concerned only with concept and theories based on certain assumptions which may not take place in reality. And even if they take place in realty they would possible be obscure. We are now heading towards 21^st century and to meet the  challenge of the century. Reality is far more important than assumption and theories. Hence, this method could be misleading. Moreover, the facts on the basis of inferences are draw may be wholly or practically untrue. Who knows!!!!!!!!

INDUCTIVE METHOD: As the deductive method leads to many false conclusions due to reliance on the imperfect and incorrect assumption, this led to the rise of a new method of investigation known as the inductive method. This method was introduced by famous historical school of thought represented by economists like Roscher, Hildebrand and Fredrick list.

         The inductive or the realistic method is just the opposite of the deductive method. According to this method we move from particular facts to general principles as opposed to the deductive method we move from general observation to particular conclusion/inferences. Thus according to this method where we move of investigation, first of all we collect facts figures of particular nature and then generalize the research finding. For example we collect samples of the prices and supplies of different commodities at different time periods. We find that when the price of cloth, meet and toothpaste etc increase sellers increase supply of these products and vice-versa. By the analysis of the correlation between the price and supply of these commodities a conclusion is drawn and generalized. The generalization is that there is always positive correlation between the price and the supply of a commodity, all other things being equal. This is commonly known as law of supply which is drawn through the inductive method.

       To apply this method of generalization an economic investigator is required to take up the following steps.

    (1) COLLECTION OF FACTS AND FIGURES OF A PARTICULAR NATURE.

    (2) ANALYSIS OF THE FACTS AND FIGURES.

    (3) TO COME UP WITH SOME RESEARCH FINDING.

    (4) GENERALIZATION OF THE FINDINGS.

       The exponents of the inductive method say that the economic phenomena are very complex and hence, cannot be left to deductive or abstract reasoning. They consider the inductive method more reliable  because it is bases on actual facts and figures and not on assumptions. Moreover, they argue that the inductive method is useful for making economic policies for a country in a particular situation as figures definitely lead to the right direction.

         But a question arises, how reliable are the facts that the have been observed? The facts may be insufficient to make an actual conclusion or it is possible that the economic investigation may have gone out of touch with some of the facts. Beside these, figures may have a limited application in a science which deals with human being and economic activities.

CONCLUSION

         Modern Economists hold that theories without facts carry no meaning while facts without  theories don’t yield result. Hence, it is imperative to correlate theories with facts for investigation. This can be using both the inductive and deductive methods simultaneously because these methods at the cost of the other would therefore be misleading. Professor Marshall says “ inductive and deductive both are needed for science thought as the right and left feet are both needed for walking”.