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Economic Reasoning

Introduction

"How did you come to that conclusion?"

People don't often ask that question about the assertions made by economic pundits—economists and media commentators.

When people draw conclusions regarding economic issues, they should be able to explain why they reach those conclusions. If they don't explain, you should call those conclusions into question. But, you need the thinking tools required to help you formulate those questions.

In this section we will discuss the reasoning processes required to come to valid conclusions about economic activity.

Principles

Economic Principles

Theories explain why things have happened in the past and why they will, with high probability, happen in the future under similar circumstance. But, sound theories rest on the foundation of accepted logical truths known as principles.

Principles consist of assumptions that provide the basis for sound economic reasoning. In terms of logic they amount to truths. Starting with these principles and using valid argument we can arrive at only sound propositions.

In this section we will discuss the fundamental principles of economics.

Theories

Economic Theories

Theories accurately describe why specific results have been achieved in the past; and why, given the same circumstances, the same result will occur in the future.

We tend to underestimate the importance of theory in most of the activities in our lives. The overlooked importance of theory has a particular importance in economics. Economists frequently confuse correlation with causation. By not testing observations with sound theory they frequently recommend actions detrimental to their desired results.

In this section will  will discuss many important theories in economics.

 

Values

Values in Economic Reasoning

Although principles and theories exist apart from an economic actor, he must include his structure of values in his economic reasoning.

At the core of economic value lies ethical values. Humans develop their scale of economic preferences based, to a large degree, on prior established ethical values.

In this topic we will discuss values generally accepted by western societies—and espoused by this site website.

Deductive Reasoning

Deductive Reasoning

Deductive reasoning plays a critically important role in the process of economic reasoning. We will therefore examine it from several different perspectives, including sound reasoning in some of the common errors made in reasoning.

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