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Economic Analysis and Economic Policy
Economic Analysis and Economic Policy
Economics, like other social sciences, has two aspects. One aspect is analytical and the other is practical. Both these aspects are of great importance because economic analysis is the basis for economic policy. These are, in fact, integral parts of each other.
(i) Clear statement of goals. There should be clear statement of economic goals to be achieved. (ii) Effects of alternative policies. The second step is to examine and consider the possible effects of alternative policies designed to achieve the economic goal. For example, while considering the merits and demerits of fiscal policy in the achievement of desired level employment, the altering monetary policy must remain under examination. (iii) Evaluation. The third step is to evaluate the effectiveness of the policies. The process of evaluation should be continuous. If any drawback is found in it at any stage, it should he improved.
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(i) It is based on facts as such the method is realistic. (ii) In order to test the economic principles, method makes statistical techniques. The inductive method is, therefore, more reliable. (iii) Inductive method is dynamic. The changing economic phenomenon are analyzed and on the basis of collected data, conclusions and solutions are drawn from them. (iv) Induction method also helps in future investigations.
Conclusion:
The above analysis reveals that both the methods have weaknesses. We cannot rely exclusively on any one of them. Modern economists are of the view that both these methods are complimentary. They partners and not rivals. Alfred Marshall has rightly remarked: Inductive and Deductive methods are both needed for scientific thought, as the right and left foot are both needed for walking.
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