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Austrian Economics

Austrian Economics. Method of Economics. Method of Economic Theory. Method - procedure for discovering scientific law • Permits independent verification by personal experience with the facts Natural science method: empirical experiments • Procedure Hypothesis Facts Test

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Austrian Economics

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  1. Austrian Economics Method of Economics

  2. Method of Economic Theory Method - procedure for discovering scientific law • Permits independent verification by personal experience with the facts Natural science method: empirical experiments • Procedure Hypothesis Facts Test Conclusion

  3. Method of Economic Theory Natural science method: empirical experiments • Example: Law of gravity F = G M1M2 r2 F = a1M1 a1M1 = G M1M2 r2 a1 = G M2 r2

  4. Method of Economic Theory Natural science method: empirical experiments • Presuppositions Events are reproducible Effects are quantitatively definite Effects are invariant across time and place • Implications Scientific prediction

  5. Method of Economic Theory Economics: scientific laws of human action • Presuppositions Reproducible events? Quantitatively-definite effects? Invariant effects? • Implication Scientific predictions?

  6. Method of Economic Theory Method of Economics Economics: statistical laws of human action • Presuppositions Class of events? Quantitatively-definite PDF? Invariant PDF? • Implication Statistical prediction?

  7. Method of Economic Theory Praxeology: Mental experiments Procedure • Reflective facts • Deduction Premises Logic Conclusions • Imaginary Constructions Ceteris paribus Successive approximation

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