April 17, 2024 

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REALISM OF MONOPOLY: If taken to the extreme, monopoly, like perfect competition is an ideal market structure that does not actually exist in the real world. In the extreme, a "pure" monopoly is a market containing one and only ONE seller of good, a good with absolutely, positively no substitutes. The product is absolutely, certifiably unique. It's not just that it has no CLOSE substitutes, it has NO substitutes. Period. End of story. In the real world, however, every product, no matter how seemingly unique it might appear, has substitutes. The substitutes might not be very close. They might be really, really bad substitutes. But they are substitutes. As such, there are no pure monopolies in the real world.

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A structured way of investigating and explaining the operation of the world by testing and verifying hypothesized relations. The scientific method is a process of discovery, a method of explaining the way the world operates. Positive economics is the application of the scientific method to economic analysis.
The scientific method is the process used to study, explain, and analyze economic phenomena. It helps make sense of the seemingly chaotic events of economic life. The price of gasoline rises. Why? A local factory lays off a hundred employees. Why? The President proposes a tax cut to stimulate the economy. Why?

Answering these questions, and thousands of others, is what the scientific method is all about.

Explaining Things

The scientific method seeks to explain the mechanisms of the world, how things work. Science seeks to identify the basic laws of nature that govern the world. More to the point, economic science, or positive economics, seeks to explain how the economic world works, to identify the economic laws of nature.

It is one thing to attribute the daily movement of the sun across the sky to the efforts of a Greek god. It is quite another to explain this movement using gravity and planetary orbits.

The great thing about the ability to explain is the resulting ability to predict. Knowing that the sun's movement is guided by the law of gravity makes it possible to predict its position tomorrow, next week, or next year. This information helps when doing things like flying to the moon.

Components of the Method

A little more insight into the scientific method can be had with an overview of several key components--theory, principles, world view, hypothesis, and verification.
  • Theory: The starting point, but also the end result, of doing science is the theory. A theory is a scientifically accepted, interrelated body of general principles used to explain and understand some aspect of the world. A theory creates a framework for investigating and explaining the world. It helps make sense out of what might appear to be random events. A theory offers an explanation for these events. It explains WHY things happen.

  • Principles: Principles are generally accepted, verified, fundamental laws of nature. As a house is constructed from concrete, lumber, and nails, a theory is constructed from principles. To be a fundamental law of nature, a principle must capture a cause-and-effect relation about the workings of the world. One example might be something like, "people seek the greatest benefit at the lowest cost." The scientific method is essentially the process of building theories by identifying and verifying these fundamental laws of nature.

  • World View: A world view contains fundamental, and unverifiable axioms, beliefs, and values about how the world works. Religious beliefs, political philosophies, and cultural conditioning are just a few of the components that go into a person's world view. These components are largely "accepted on faith" and cannot be tested or verified directly. Without a doubt, the best example of a world view component is the belief in God--a supreme, omniscient, omnipotent being. Another example is the presumption that human beings are basically good (as opposed to basically evil). These beliefs cannot be directly verified and must be accepted on faith.

  • Hypotheses: Principles are the end result of a long, scrutinizing process that starts with hypotheses. A hypothesis is a reasonable proposition about the workings of the world that is inspired or implied by a theory and which may or may not be true. Hypotheses are generated from informed ignorance--informed, because they are implied by a theory that has been previously subjected to a great deal of scrutiny, but ignorance, because no one yet knows if the hypothesis is right.

  • Verification: This gives rise to the fifth and last part of the scientific method, verification. To know if a hypothesis is right or wrong, comparison is made with data, empirical observations drawn from the real world. The scientific method is ultimately concerned with explaining the workings of the real world. Perhaps a Greek god carries the sun across the sky. Perhaps the sun's apparent trek across the sky is caused by the rotation of the earth. Both are hypothesized relations for the perceived motion of the sun. Which is correct? The only way to know is through verification and testing--to compare the hypotheses with what actually happens in the real world.

Verifying hypotheses with real world data is the crucial step in transforming a hypothetical relation into a fundamental law of nature--a principle. A hypotheses must pass the real-world-data test to become a principle. And this is the scientific method.

More than a Subject, a Process

The scientific method is a process, a way of explaining the world. It is more than a subject taught by people in lab coats. While chemistry, physics, and biology are most often associated with science--subjects termed physical science--the scientific method is also used for the study of society and human behavior. Economics is a science, a social science, the scientific study of society.

In fact, science is more than a subject. It is a process. The scientific method can be applied to a wide range of subjects, including things like human behavior, the economy, and, in general, society. This scientific study of society gives rise to the social sciences. That is where economics can be found. It is a social science, the scientific study of society.

Science, whether physical or social, differs only in WHAT it studies, not HOW it studies. Science is not a specific subject, but a way of viewing the world. And this process, this scientific method, is the topic of the day.

A Word About Values

Even though the scientific method seeks to objectively explain real world events, it is not completely value free. Subjective values play a role in the scientific method, especially when applied to economics.
  • First, subjective values often enter into the unverifiable axioms and world view that make up a scientific theory. Scientists tend to (unwittingly in some cases) develop theories that reflect their own subjective political, cultural, or religious beliefs.

  • Second, subjective values often influence the specific topics studied using the scientific method. The topics that someone subjectively deems to be more important attract scientific resources, others do not.


Recommended Citation:

SCIENTIFIC METHOD, AmosWEB Encyclonomic WEB*pedia,, AmosWEB LLC, 2000-2024. [Accessed: April 17, 2024].

Check Out These Related Terms...

     | phenomenon | theory | principle | hypothesis | world view | verification | data | science | social science | abstraction | cause and effect |

Or For A Little Background...

     | positive economics | economic analysis | economic science |

And For Further Study...

     | sixth rule of ignorance | ceteris paribus | comparative statics | fallacies | political views | dismal science | economics | economic thinking | seven economic rules | American Association for the Advancement of Science | American Economic Association | National Science Foundation | utility analysis | short-run production analysis | business cycles | circular flow |

Related Websites (Will Open in New Window)...

     | American Association for the Advancement of Science | American Economic Association | National Science Foundation |

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