Economic Methodology
June 19, 2025
1
,Economic Methodology
Contents
1 Lecture 1: Introduction 5
2 Lecture 2: Doing methodology: some case studies 7
2.1 Case study 1: Defining economics . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Case study 2: Crisis of 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Case study 3: The Nobel memorial prize . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 Lecture 3: What are theories in science, induction and deduction 11
3.1 what is a scientific theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 induction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4 Lecture 4: Theories and laws in economics 15
4.1 what are laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 what are theories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5 Lecture 5: Bringing theories to the real world 19
5.1 Theories, assumptions, hypotheses, predictions . . . . . . . . . . . . . . . . . . . 19
5.2 Friedman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Friedman, the methodology on positive economics . . . . . . . . . . . . . . . . . 21
5.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6 Lecture 6: Facts and theories in economics: thinking with data harmlessly 24
6.1 recap of Friedman (1953) & connections with today’s topic . . . . . . . . . . . . 24
6.2 Thinking with data harmlessly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7 Lecture 7: Between theories and data 29
7.1 addressing unclear material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Models in Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Sudgen (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8 Lecture 8: Models in economics 36
8.1 200 year long evolution of models . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Contemporary models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Should models be realistic? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9 Lecture 9: The context of science 40
2
,Economic Methodology
10 Lecture 10: Economists in the wild 44
11 Lecture 11: economics and other disciplines 48
12 Lecture 12: Questioning good and bad 51
13 Lecture 13: New methods: qualitative studies in economics 55
14 Lecture 14: New methods: Quantitative studies in economics 59
15 Tutorial 2 61
16 Tutorial 3 62
16.1 essays & how you can prepare for writing them . . . . . . . . . . . . . . . . . . . 62
17 Tutorial 4 65
18 short summary of readings 68
18.1 L3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
18.2 L4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
18.3 L6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
18.4 L8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.5 L9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3
, Economic Methodology
course manual
Assessment:
• Essay 40%
• Written exam 60% (All MC questions
• BONUS Quizzes: 5 quizzes, per quiz a max of 0.1 bonus, so 0.5 total
• Pass is a 5 for essay and exam, course should be 5.5
4
June 19, 2025
1
,Economic Methodology
Contents
1 Lecture 1: Introduction 5
2 Lecture 2: Doing methodology: some case studies 7
2.1 Case study 1: Defining economics . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Case study 2: Crisis of 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Case study 3: The Nobel memorial prize . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 Lecture 3: What are theories in science, induction and deduction 11
3.1 what is a scientific theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 induction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4 Lecture 4: Theories and laws in economics 15
4.1 what are laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 what are theories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5 Lecture 5: Bringing theories to the real world 19
5.1 Theories, assumptions, hypotheses, predictions . . . . . . . . . . . . . . . . . . . 19
5.2 Friedman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Friedman, the methodology on positive economics . . . . . . . . . . . . . . . . . 21
5.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6 Lecture 6: Facts and theories in economics: thinking with data harmlessly 24
6.1 recap of Friedman (1953) & connections with today’s topic . . . . . . . . . . . . 24
6.2 Thinking with data harmlessly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7 Lecture 7: Between theories and data 29
7.1 addressing unclear material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Models in Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Sudgen (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8 Lecture 8: Models in economics 36
8.1 200 year long evolution of models . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Contemporary models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Should models be realistic? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9 Lecture 9: The context of science 40
2
,Economic Methodology
10 Lecture 10: Economists in the wild 44
11 Lecture 11: economics and other disciplines 48
12 Lecture 12: Questioning good and bad 51
13 Lecture 13: New methods: qualitative studies in economics 55
14 Lecture 14: New methods: Quantitative studies in economics 59
15 Tutorial 2 61
16 Tutorial 3 62
16.1 essays & how you can prepare for writing them . . . . . . . . . . . . . . . . . . . 62
17 Tutorial 4 65
18 short summary of readings 68
18.1 L3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
18.2 L4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
18.3 L6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
18.4 L8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.5 L9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3
, Economic Methodology
course manual
Assessment:
• Essay 40%
• Written exam 60% (All MC questions
• BONUS Quizzes: 5 quizzes, per quiz a max of 0.1 bonus, so 0.5 total
• Pass is a 5 for essay and exam, course should be 5.5
4
