Methods of economic theory

Developing and creating economic theory, economic science uses a whole arsenal of research methods. The methods of economic theory are specific ways and techniques of its penetration into the secrets of the economy, the discovery and study of the laws of its functioning and development.

In economic theory, a system of methods is used.

The method of scientific abstraction is one of the main methods of cognition of the economic world, because here you will not use either a microscope or a chemical reagent. It is the knowledge of the main, the deep, the essential on the basis of distraction from atypical and random features and manifestations. This is how categories, laws, patterns, principles of action or use are known.

The method of induction means the derivation of the theory on the basis of direct observation of facts and their subsequent generalization.

The method of deduction, on the contrary, involves the formation of hypotheses, versions, and then consideration and confirmation of them with real facts.

The method of analysis and synthesis means that economic reality, when studying it, seems to be divided into its constituent parts and elements, which are carefully studied individually. Then the elements known from within are reunited into a whole, synthesized and considered as a unity.

The method of the system approach involves the study of the economy as a whole, as a system of interdependent and interrelated elements with common properties.

Dialectical method – prefers the identification of deep connections hidden from the external eye. Therefore, he distinguishes between phenomenon and essence. This method pays great attention to the development, change of the objects and phenomena under study. The most important impulse of development is recognized as the internal contradiction of the phenomenon and the need for its resolution, which leads to the emergence of a new phenomenon or to the modification of the old one.

Economic theory is a fairly accurate science. As a rule, economic phenomena, processes, their results are amenable to quantitative expression and measurement. That is why when studying economic theory, formulas, graphs, calculation indicators, indices are used.

But its distinctive feature is that it is a quantitative and qualitative science. Yes, a lot can be calculated in the economy, but the real economy is not just the creation of a finished product by some equipment, but it is primarily people – their intellectual, physical and moral labor, their complex labor interaction, their economic relations, without which there is no economy. In other words, these are also special socio-economic ties and relations that are very difficult to mathematize. Therefore, the economy should be carefully studied through qualitative, essential and factorial characteristics, and not just quantitative ones.

A certain gap in this quantitative-qualitative unity in the theory is fraught with its lack of comprehensiveness, objectivity and complexity. These “weaknesses” to a certain extent suffer, on the one hand, political economy, when only the social side of the economy is studied, and on the other hand, the economy, where quantitative analysis often replaces qualitative, essential, where excessive “mathematical science” complicates the subject, but does not give it greater depth.

This means that economic analysis should be comprehensive – both qualitative (What? Why? How?) and quantitative (How much? What share? etc.)

Economic analysis, research, in order to develop theory and serve practice, must be scientific.

The scientific approach means such an approach to the analysis of real phenomena, in which new knowledge is obtained. Moreover, this new knowledge is able to explain, classify and predict phenomena and processes in a certain sphere of reality (say, in the economy). Schematically, the analysis of economic phenomena on the basis of a scientific approach is presented in Fig. 1.1.

Identification of a problem (real or theoretical) that needs to be resolved

Search and formulation of a hypothesis

Meaningful and quantitative assessment of the hypothesis based on real facts

Development of predictive options for the adoption of the hypothesis

Testing the accuracy of the hypothesis and predictions based on the hypothesis

Refinement of the hypothesis

Development and strengthening of evidence establishing the truth of the hypothesis

Verification of evidence

Development (transformation) of an evidence-based hypothesis into a new theory

In case of unproven – revision of the hypothesis

Fig.1.1. Scientific approach to economic analysis

A scientific approach to economics and its analysis is an approach to the study of real economic processes in which new knowledge is obtained and used.

The peculiarity of economic theory is predetermined by its historical character. It is manifested, in particular, in the fact that new theories (directions) emerging over time, if they stand the test of practice and time, are integrated into this science on the basis of a more fundamental approach. They are included in general economic theory as special manifestations or directions of general, fundamental knowledge.

Thus, for example, the provisions of special directions – mercantilism and physiocracy that the wealth of society is created respectively in trade and agriculture – turned out to be a particular manifestation of the general conclusion of the classical school of economics, which based wealth on labor not only in trade or in agriculture, but labor in any industry or “labor in general”. Thus, in the process of historical integration of schools, the fundamental foundations of economic theory are crystallized. This process of fundamentalization of science has been going on before, it continues now.