The Research Process Fun and Excitement for Economics Majors!!!

What is the point of theory? Prediction Understanding

What is a theory? A theory is a coherent set of propositions used as principles of explanation of the apparent relationships of certain observed phenomena Examples - theory of consumer behavior - maximize utility, theory of the firm - maximize profits

What is an hypothesis? A proposition that is empirically testable Example: increasing labor quality increases productivity Leads to need to concretely define concepts, e.g., productivity (Q/L) Hypothesis testing can lead to support or refutation of a theory

Stages in building theories and applying the scientific method 1Assessing existing knowledge (literature review) 2Formulating concepts and propositions (developing a model) 3Stating an hypothesis 4Designing the research to test the hypothesis 5Acquiring the data 6Analyzing the data and evaluating the results 7Providing an explanation and stating new research questions

Types of Research: Basic Research Applied Research

Basic Research Conducted for the purpose of developing theory Approach may be verbal, graphical or mathematical May inspire others to “test” the theory May be inductively or deductively based upon observations about the behavior of variables

Applied Research Tests a theory or theories May compare two or more theories May simply add support to or refute a theory Replication on different data or different circumstances is desirable to “reproduce” results and test generalizability of theories

Types of Applied Research Descriptive Case Study Survey Research Content Analysis Correlation Regression Analysis (Econometrics) Mathematical Programming

Descriptive Research Designed to determine the current status of a subject of study Often preliminary to other types of research Often used to persuade the reader Example: overview of Asian economic crisis, survey of world car market

Case Study In-depth investigation of an individual, group or institution Widely used in business to analyze successes and failures Aimed at finding out “why”. Ex. How has Starbucks managed its rapid expansion during the 1990’s

Survey Research Collecting data from a sample population to test economics theory or ascertain economic values Experimental - create a hypothetical market situation and observe behavior to test an hypothesis

Content Analysis Tries to judge support for a theory from analyzing the “content” of writings

Correlation Involves collecting and analyzing data to determine whether, and to what degree, variables move together Does not imply causality although often interpreted that way Examples - family wealth and educational attainment, sunspots and economic output

Regression Analysis More sophisticated form of statistical analysis which controls for the effects of other variables in relationship hypothesized to be causal Examples - demand curve, relationship between money supply and interest rates

Mathematical Programming Develop a set of equations describing an economic system and, using a computer, run the model to study how the system works Optimization - linear programming Simulation - ithink

That’s all Folks!!!

What Makes A “Good” Topic? It’s “doable” - data is available, you understand the methodology, it can be done in the time available. It’s specific, not vague or general. The question can be answered. It’s topical - there’s current interest in it. It matters - it has societal significance. Most important: you like it.