Unrealistic?

When done correctly, the pursuit of knowledge is greatly enhanced by unrealistic abstraction. For example, when traveling across the country along an interstate highway, a paper road map is a handy, abstract tool. It shows towns and cities along the way, major intersections, rest stop locations, and other important points of interest. However, it ignores unimportant details. It does not show the location of every tree, bush, or blade of grass. This information does not enhance the road trip.

Abstraction Done Right

For example, analyzing the market for shoes requires information about the price of shoes and the quantity of shoes sold. Ignoring either of these defeats the purpose of the analysis. But what else should be included in the analysis? Sock prices? Shoe polish sales? Buyers' incomes? Gasoline prices? Hair color? Pulse rate?

Methods of Abstraction

• Words: One of the earliest methods of abstraction developed by humans is to represent objects and ideas with words. This is a handy way of doing economic abstraction, too. For example, writing the word "frog" on a piece of paper does not mean an actual frog is on the paper. The word only represents the idea of a frog. In the same way, economists use words to represent economic concepts, principles, and relations--such as money or income. The downside to words, however, is that they can have different meanings.

  Does "frog" mean an amphibious creature or a parched throat? How much money did Duncan Thurly make last year? Did he really make money or did he earn income? (Hint: "Making money" for anyone but the government is counterfeiting, which is illegal. In all likelihood, Duncan did not make any money last year.) Words can be confusing, eh?



• Graphs: Pictures, especially graphical pictures, are often worth thousands of words. Many economic theories are abstractly represented with graphs. While the word "frog" could be misinterpreted as a parched throat, a picture of a frog can be used to represent this amphibious fellow more clearly. Many economic relations lend themselves to graphical pictures, especially lines and curves.


• Equations: While pictures might be worth a thousand words, they are flat and two dimensional. As such, economic concepts, principles, and theories are often abstractly represented by equations. Graphs are an excellent way of representing relations between two variables, such as the price of shoes and the quantity of the shoes sold. Economics, however, is often interested in more than two things. This is where mathematical equations are useful. Equations are mathematical relations between variables. In principle, equations can represent relations between any number of variables. The relation between three variables Y, X, and Z can be represented by an equation such as:

  Y = 3 + 2X - 4Z.

  This equations shows the connection between X and Y, and between Z and Y. More variables can be added easily to this equation to represent more relations.