chapter  18
8 Pages

THE ROLE OF APPLIED ECONOMICS

WithDavid Greenaway

In any science, ‘application’ involves confronting testable hypotheses with real-world situations and real-world data. This is equally true of economics. Theorizing generates testable propositions; exposing those propositions to data using empirical methods, which range from the casual to the sophisticated, generates results. In turn these results may provide support for a specific hypothesis, or may give cause for rethinking the theoretical basis to the problem. In some ways the basic process is more complicated in economics than in other disciplines, largely because the process of data generation is rather different, certainly than is the case in the natural sciences. Subject to some qualifications to be made later, economists are generally not in a position to generate their own data set, nor are they well placed to engage in replication. Nevertheless the basic proposition that methodologically there are similarities between applied economics and applications in other sciences still holds.