1. 1-4 Tools Economist Use
Mr. Kusmits

2. Scientific Method (Economic is a Social Science)
Pose a question
Research the question
Hypothesis
Collect data
Evaluate the hypothesis

3. Natural Experiments
Economist do not have labs – cannot conduct experiments
Must use natural experiments
1974 and 1995 speed limit changes
NOTICE– economist focus on cost and savings--- not safety alone

4. 2D in a 3D world

5. 2D in a 3D World Cont. Really graphs show statistics
Well… I know this guy he has a million dollars and dropped out of school
Graphs show correlation NOT causation
Correlation shows a connection (what is typical)
GRAPHS CAN NOT SHOW ALL VARIABLES

6. Models Economic Model Rational-behavior model
Measure of effects one variable at a time
Useful for both predicting future and explaining past events
Rational-behavior model
People base decisions on reason- behaving in ways that serve own wants

7. All Things Equal
Change one thing at a time when faced with many (not missing) factors.
This is possible with known factors with statistics