Relationships Between Economic Variables

Abstract

Some of the concepts we use frequently in economics are profits, costs, price, marginal propensities, marginal products, liquidity, supply, demand, production, capacity utilisation, multipliers, and this by no means exhausts the possibilities. Any subject, if it is to come to some understanding of real-world phenomena, must define and classify things. Whether the world is like this is not at issue; however, there is a presupposition that there is an order in nature which we are trying to find. We classify and clarify regularities which we observe in nature. Even further we must classify and clarify the associations which exist. To do this, as Chapter 1 indicated, it is necessary to view the facts to be explained in a theoretical framework since it is theory, with its concepts, laws and hypotheses, which help us to see the relationships between the things that are the subject-matter of scientific explanation. Exactly what things are to be considered in any analysis depends upon the particular problem under consideration and this will often be determined by common sense, ideology, or, in many cases, by imaginative insight into the specific problem. Economic theorising, like all theorising, is very much an act of creation.