David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

2.10 Some popular criticisms of economics and economists
rise in income in Figure 2. 7, the consequence of greater tube use is to generate more revenue at any
particular level of tube fares. That is why, in Figure 2.3, the data after 2003/04 show much higher tube use
than before at each level of tube fares.
T _
h _
e _
or _
ie
_
s _
a _
nd _
e _
v _
id _
e _
nc _
e
Economists analyse a problem in three distinct stages. First, a phenomenon is observed or contemplated and
the problem is formulated. By armchair reasoning or a cursory inspection of the data, we decide tube fares have
something to do with tube revenues. We want to understand what this relationship is and why it exists.
Second, we develop a theory or model to capture the essence of the phenomenon. By thinking about
incomes and the decision about which type of transport to use, we identify the things relevant to tube
usage and hence tube revenue.
Third, we test the predictions of the theory by confronting it with economic data. An econometric
examination of the data can quantify the things the model identifies. We can see if, on average, they work
in the direction our model suggests. Indeed, by including in our econometric investigation some extra
factors deliberately left out of our model in the quest for simplicity, we can check that the extra influences
were sufficiently unimportant that it made sense to omit them from the analysis.
Suppose we confront our theory with the data and the two seem compatible. We do not reject our theory.
If our model is rejected, we have to start again. If our model is not rejected by the data, this does not
guarantee that we have found the correct model. There may be a better model that has escaped our attention
but would also be compatible with our particular data. As time passes, we acquire new data. We can also
use data from other countries. The more we confront our model with different data and find that it is still
not rejected, the more confident we become that we have found the true explanation of the behaviour in
which we are interested. Relationships in which we have become very confident are sometimes called
economic laws.
Some popular criticisms of economics and economists
This chapter has introduced the economist's toolkit. You may have some nagging doubts about it. We end
the chapter by discussing some of the popular criticisms of economics and economists.
Get a Becker view: use an economist's spectacles
Most people accept that the economic analysis of markets - thinking about how incentives
affect resource allocation - helps us understand things like inflation or unemployment. Can the
same tools be applied to other social behaviour? To crime? To marriage? To drug use?
Since much of economic analysis supposes that people are driven by self-interest, rather than by an altruistic
concern for others, some economists doubt whether economics can shed light on highly interactive 'social'
situations. Other economists have no such fears. In 1992 Chicago economist Gary Becker was awarded the
Nobel Prize for Economics for applying the logic of economic incentives to almost every facet of human
behaviour. Some examples of Becker in action . .
.
O
37