1.2.1—Economic methodology

Economic methodology uses models, assumptions and evidence to simplify complex systems and test explanations. Positive statements can be checked against evidence; normative judgements depend on values.

Ceteris paribus isolates one relationship; reasoning connects observations, theory and predictions. Models are useful only within assumptions.

State claim, assumptions, evidence and whether it is positive or normative.

A model predicts a tax reduces demand holding other factors constant; data can test it, but whether the tax is desirable is normative.

A model is not reality and correlation alone does not prove causation.

A positive method moves from logic and hypotheses through a simplified model to predictions, empirical testing and possible refutation; evidence that repeatedly contradicts a prediction should lead to revision or rejection. Normative policy judgments depend on values. Equality means sameness in a stated dimension, while equity concerns fairness and may justify unequal treatment or outcomes; neither term has one uncontested policy interpretation.