ABSTRACT

Our previous discussions concerning the results of econometric research belong to what we have called earlier in this book (§ 4) the first and the second stage of investigation: formulating and testing the theory, and carrying out measurements. We have now reached the third stage, in which mathematical-economic conclusions are drawn. These conclusions refer either to the explanation of a given historic course from the data, or to the probable consequences of certain measures of economic policy. For both sorts of conclusions it is necessary to know the functioning of economic systems. Such a system may be a single market or a whole economy, possibly also a group of connected markets. The functioning is reflected in a number of equations, with the phenomena to be explained as unknowns. With one market, there are two phenomena: price and quantity sold; with a larger system there may be many more.