1. Economics
Theories and Data

2. Positive statements
Normative statements
Most disagreement among the economists is about normative stuff
But remember about preconceptions

3. Theory – what do you think a theory is? A techy way to think about:
Real world phenomena and what we want to explain
Phenomenon in a theory = a variable
Well defined item
Can take on many values
Exogenous variable
Endogenous variable

4. Model + Variables = Theory
A model
An abstract that relates variables
Can be manipulated easily
Do not have to break a real thing
!!! Used as a synonym for “theory” all the time
Model + Variables = Theory
Good theory
Clear
Simple
General
Refutable

5. A theory is a guess, has to be tested to obtain credibility
Rejection vs confirmation vs proof
Experiments vs statistics/econometrics
Correlation vs causation
!!! Used as a synonym for “theory” all the time
Model + Variables = Theory
Good theory
Clear
Simple
General
Refutable