Question

1. Compare and contrast German Historical School’s inductive method with Marginalist’s deductive method. By using an example, discuss why both methods were finally accepted as complementary to each other.

2. According to the Institutionalist School, “a complex organism cannot be understood if each segment is treated as if it were unrelated to larger entity”. Explain whether this statement is supported or rejected by (i) Keynesian School (ii) Chicago School (New Classicism).

Answer 1

ans 1=

The normal methodologies of scientific studies — induction & deduction, are available to the economists.

Both come from science, i.e., Logic. The deductive methodology involves reasoning from some basic pro­positions, the truth of which is presumed. The inductive methodology involves gathering of facts, drawing inferences from them & testing the inferences by other realities.

Deduction-

· Begins from the general & moves to the specific.

· Starts with general presumptions & moves to specific conclusions.

· Develops a concept, & then studies the facts to understand whether they follow the concept.

Induction-

· Begins from the specific & moves to the universal.

· Starts with specific observations & moves to universal explanations.

· Gathers observations, then forms a concept to fit the facts.

Economics can be a rather deductive domain, & economists are used to constructing complex ‘models’ of human behaviour that start with a number of presumptions. But, economics is also empirical , utilizing inductive methodologies to describe observed facts.

Hence, a down­ward-sloping demand curve, for instance, can be deduced from general presumptions about how persons attempt to maximise their satisfaction from the procurement of commodities. In contrast, demand curves can be constructed empirically, i.e. by observing actual consumers reacting to market price modifications, & when market investigators, census-takers & opinion examiners gather neces­sary info, the data can be utilized inductively to formulate economic forecasts .

In practice it can be rather tough to state where deduction terminates & induction starts. Economists need to utilize both induction & deduction in their work.