1.2 How do economists approach the world?

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.

Economic thought contains competing explanations about markets, intervention, distribution and growth.

Different schools prioritise different mechanisms and time horizons, so the same shock can yield different policy views.

Identify the problem, mechanism and policy implication before comparing viewpoints.

A demand collapse may lead one view to stress flexible prices and another to stress aggregate demand and public spending.

Schools are analytical lenses, not labels predicting every economist.