HOME

TheInfoList




Applied economics is the application of
economic theory Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plant life and a bran ...
and
econometrics Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of Econ ...

econometrics
in specific settings. As one of the two sets of fields of
economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interact ...

economics
(the other set being the ''core''), it is typically characterized by the application of the ''core'', i.e. economic theory and
econometrics Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of Econ ...

econometrics
to address practical issues in a range of fields including
demographic economics Demographic economics or population economics is the application of economic analysis to demography, the study of human populations, including population size, size, population growth, growth, population density, density, population distribution, ...
,
labour economics Labour economics seeks to understand the functioning and dynamics of the markets Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finlan ...
,
business economics Business economics is a field in applied economics Applied economics is the application of economic theory Economics () is the social science that studies how people interact with value; in particular, the Production (economics), produc ...
,
industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and market (economics), markets. Industrial organization adds real-world complic ...
,
agricultural economics Agricultural economics is an applied field of economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biol ...
,
development economics Development economics is a branch of economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services ...
,
education economics Education economics or the economics of education is the study of economic An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Prod ...
,
engineering economics ''For the application of engineering economics in the practice of civil engineering Civil engineering is a professional engineering Regulation and licensure in engineering is established by various jurisdictions of the world to encourage pu ...
,
financial economics Financial economics is the branch of economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among i ...
,
health economics Health economics is a branch of economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or ...
,
monetary economics Monetary economics is the branch of economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or ph ...
,
public economics Public economics (or economics of the public sector) is the study of government policy through the lens of economic efficiency In , economic efficiency is, roughly speaking, a situation in which nothing can be improved without something else being ...
, and
economic history Economic history is the academic study of economies An economy (from Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in S ...
. From the perspective of economic development, the purpose of applied economics is to enhance the quality of business practices and national policy making. The process often involves a reduction in the level of abstraction of this core theory. There are a variety of approaches including not only empirical estimation using
econometrics Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of Econ ...

econometrics
,
input-output analysis In computing Computing is any goal-oriented activity requiring, benefiting from, or creating computing machinery. It includes the study and experimentation of algorithmic processes and development of both computer hardware , hardware and soft ...
or simulations but also case studies, historical analogy and so-called common sense or the "vernacular".Swann, G. M. P. (2006) ''Putting Econometrics in Its Place: A New Direction in Applied Economics'' (published by Edward Elgar). This range of approaches is indicative of what Roger Backhouse and Jeff Biddle argue is the ambiguous nature of the concept of applied economics. It is a concept with multiple meanings.Backhouse, R. and Jeff Biddle (2000)
The concept of applied economics: a history of ambiguity and multiple meanings
, ''History of Applied Economics 32'' (annual supplement), 2000.
Among broad
methodological Methodology is the study of research methods, or, more formally, "'a contextual framework' for research, a coherent and logical scheme based on views, beliefs, and values, that guides the choices researchers
r other users R, or r, is the eighteenth letter Letter, letters, or literature may refer to: Characters typeface * Letter (alphabet) A letter is a segmental symbol A symbol is a mark, sign, or word that indicates, signifies, or is understood as ...
make". It compris ...
distinctions, one source places it in neither
positive Positive is a property of Positivity (disambiguation), positivity and may refer to: Mathematics and science * Positive formula, a logical formula not containing negation * Positive number, a number that is greater than 0 * Plus sign, the sign " ...
nor
normative economics Normative economics (as opposed to positive economics Positive economics (as opposed to normative economics) is the branch of economics Economics () is the social science that studies how people interact with value; in particular, the Prod ...
but the ''art of economics'', glossed as "what most economists do".


Origins of the term

The origin and meanings of applied economics have a long history going back to the writing of
Say Say may refer to: Music *''Say'' (album), 2008 album by J-pop singer Misono *Say (John Mayer song), "Say" (John Mayer song), 2007 *"Say (All I Need)", 2007 song by American pop rock band OneRepublic *Say (Method Man song), "Say" (Method Man song) ...

Say
and
Mill Mill may refer to: Science and technology * * Mill (grinding) * Milling (machining) * List of types of mill * Mill, the arithmetic unit of the Analytical Engine early computer * Textile manufacturing, Textile mill * Steel mill, a factory for the ...
. Say wrote about "applying" the “general principles of political economy” to "ascertain the rule of action of any combination of circumstances presented to us". The full title of Mill's (1848) work is Principles of Political Economy with Some of Their Applications to Social Philosophy.


J.N. Keynes discussion

John Neville Keynes John Neville Keynes ( ; 31 August 1852 – 15 November 1949) was a British economist An economist is a professional and practitioner in the social science Social science is the branch A branch ( or , ) or tree branch (sometim ...
was perhaps the first to use the phrase “applied economics”. He noted that the "English School" (
John Stuart Mill John Stuart Mill (20 May 1806 – 7 May 1873), also cited as J. S. Mill, was an English philosopher, Political economy, political economist, Member of Parliament (United Kingdom), Member of Parliament (MP) and civil servant. One of the most i ...
,
John Elliott Cairnes John Elliott Cairnes (26 December 1823 – 8 July 1875) was an Republic of Ireland, Irish-born political economist. He has been described as the "last of the classical economists". Biography John Cairnes was born at Castlebellingham, County L ...
, and
Nassau William Senior Nassau William Senior (; 26 September 1790 – 4 June 1864), was an English lawyer known as an economist An economist is a professional and practitioner in the social science Social science is the branch A branch ( or , ) or t ...

Nassau William Senior
) believed that political economy was a positive, abstract, deductive science; and that this school made a clear distinction “between political economy itself and its applications to practice" (1917, 12). This School thought that a general body of theory could be established through abstract reasoning – not relying on a wide knowledge of economic facts. From this point of view applying this theory involved making allowances for some of the factors ignored in building the abstract theories. Keynes wrote about applying the political economies hypothetical laws to interpreting and explaining of “concrete industrial facts". The issue of conceptual distinction between political economy as a science (involving formulating laws which govern the production and distribution of wealth) and political economy as an art (using the laws to tackle practical problems).Keynes, John Neville. 1917. The Scope and Method of Political Economy. London: Macmillan. Whilst noting the rival view of the historical economists, who believed that the goals being pursued by policy makers and the means to pursue them were an integral part of the science of economics, J.N Keynes believed in the desirability of the "English School's" distinction between the discovery of principles and their application (1917, 54). Indeed, it was he who proposed using the phrase “applied economics” instead of “the art of political economy”. Keynes further discussed the uses of the phrases applied political economy and applied economics noting three different uses: # in the sense suggested in the text n association with the art of political economy # to designate the application of economic theory to the interpretation and explanation of particular economic phenomena, without any necessary reference however, to the solution of practical questions; # to mark off the more concrete and specialized portions of economic doctrine from those more abstract doctrines that are held to pervade all economic reasoning. (1917, 58–59) and applying theories of economy on what we have in reality to get a healthy enterprise and business prosperity.


Other 19th and early 20th century economists’ use of the term

Léon Walras Marie-Esprit-Léon Walras (; 16 December 1834 – 5 January 1910) was a French mathematical economist and Georgist Georgism, also called in modern times geoism and known historically as the single tax movement, is an economic ideology holding ...
, for example, planned to organize his main work into volumes on "pure," "applied," and "social" economics. Jaffé (1983) describes Walras's plan as involving making a distinction between that which is true, is useful, and is just. In using the term true, Walras referred to propositions that necessarily followed from the nature of things. Pure economics then involves pure logic. Applied economics involves examining ways to achieve practical goals and requires the making judgments about whether or not the logic of pure economics was relevant to the real world. Social economics also presumed pure economics, but dealt with a different range of questions than did applied economics.
Vilfredo Pareto Vilfredo Federico Damaso Pareto ( , , , ; born Wilfried Fritz Pareto; 15 July 1848 – 19 August 1923) was an Italian civil engineer A civil engineer is a person who practices civil engineering Civil engineering is a professional enginee ...

Vilfredo Pareto
(
906 __NOTOC__ Year 906 ( CMVI) was a common year starting on Wednesday A common year starting on Wednesday is any non-leap year A leap year (also known as an intercalary year or wikt:bissextile, bissextile year) is a calendar year that contains ...
1971, 104) follows as similar usage suggesting economics might begin by eliminating that which is inessential to examine problems as reduced to their principal and essentials. He distinguishes between "pure economics" from "applied economics" with pure economics containing only the principal lines of argument and applied economics involving supplying the details.
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian political economist Political economy is the study of Production (economics), production and trade and their relations with law, Custom (law), custom and gover ...
(1954, 23) referred to some applied fields in economics the repetition of which might help highlight some of the issues involved in what defining applied economics involves. He discussed the following fields: # those that are typically thought of as part of economics but which also looked at individually to allow greater attention to detail – e.g. money and banking, trade, cycles, and location # those that are independent of economics but study of them is needed for economics. These include subjects such as
accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compare with other ob ...
, actuarial science, and
insurance Insurance is a means of protection from financial loss. It is a form of risk management Risk management is the identification, evaluation, and prioritization of risk In simple terms, risk is the possibility of something bad happening. ...

insurance
# those that are areas of public policy: agriculture, labour, transportation, utility industries, control of industry, and public finance #
comparative economic systems Comparative Economic Systems is the sub-classification of economics dealing with the JEL classification codes#P. Economic Systems, comparative study of different systems of economic organization, such as capitalism, socialism, feudalism and the mi ...
#
demography Demography (from prefix ''demo-'' from Ancient Greek Ancient Greek includes the forms of the used in and the from around 1500 BC to 300 BC. It is often roughly divided into the following periods: (), Dark Ages (), the period ...

demography
#
area studies Area studies (also regional studies) are interdisciplinary fields of research and scholarship pertaining to particular geography, geographical, national/Federal government, federal, or culture, cultural regions. The term exists primarily as a gen ...


More modern views


Mainstream view

Modern mainstream economics holds the view that there is a body of abstract economic theory – the "core" – and applied economics involves the practitioner in the lowering some elements of the abstraction of this to examine particular issues. This lowering of the level of abstraction may involve: * relabeling variables as more specific, concrete concepts; * providing some structure to allow the drawing of more detailed conclusions; * producing numerical estimates for some of the parameters; * using the analysis to interpret the real world phenomena which are interpreted as examples of some more general class of events that the core theory might be used to examine.


Economics as a science

Pesaran and Harcourt (2000) describe
Stone A rock is any naturally occurring solid mass or aggregate of minerals or mineraloid matter. It is categorized by the minerals included, its chemical composition and the way in which it is formed. Rocks form the Earth's outer solid layer, th ...
's attempt to face the challenge of making economics into a science by combining theory and measurement within a cohesive framework. They report Stone's proposal for the establishment of the now famous Department of Applied Economics at Cambridge.Pesaran, M. H. and G. C. Harcourt (2000),“The life and work of John Richard Nicholas Stone 1913–1991,”Economic Journal Stone argued that: :''"The ultimate aim of applied economics is to increase human welfare by the investigation and analysis of economic problems of the real world. It is the view of the Department that this can best be achieved by the synthesis of three types of study which now tend to be pursued in isolation. The Department will concentrate simultaneously on the work of observations, i.e. the discovery and preparation of data; the theoretical appraisal of problems, i.e. the framing of hypotheses in a form suitable for quantitative testing; and the development of statistical methods appropriate to the special problems of economic information. The special character of the Department’s approach to problems of the real world will lie in this attempt at systematic synthesis."'' (Stone in Pesaran and Harcourt (2000) pp. 149–150)


Other views

The basis for rival approaches tends to be the denial that sound theory can be made without some concrete linking with its area of application. Both the 19th century
Historical School Historiography is the study of the methods of historians in developing history as an academic discipline, and by extension is any body of historical work on a particular subject. The historiography of a specific topic covers how historians have ...
and the 20th Century Institutionalists argue in this way. (1936) noted that those working in "specialized fields" had little use for kind of qualitative theory postulated by
Marshall Marshall may refer to: Places United States * Marshall, Alaska * Marshall, Arkansas * Marshall, California * Lotus, California, former name Marshall * Marshall Pass, a mountain pass in Colorado * Marshall, Illinois * Marshall, Indiana * Marshall, ...

Marshall
and . Mitchell suggested that knowledge of "real markets," would cause the complexion and content of economic theory (Mitchell 1937, 26–28).
Friedman Friedman, Friedmann, and Freedman are surnames of German origin, and from the 17th century were also adopted by Ashkenazi Jews. It is the 9th most common surname in Israel (8th among Jews) and most common exclusively Ashkenazi name. They may refer ...

Friedman
shared this view that theoretical concepts might or rather should arise out of the analysis of real world data. For both Mitchell and Friedman economics should involve an interaction between examining data and formulating hypotheses. Another issue which is related to the McCloskey critique. This is economists do not necessarily practice what they preach. In this context that is the claim to be an "applied economist," is just shorthand for saying they are looking at the real economy. What is being applied need not be "economic theory", as conventionally defined rather something more basic. Eli Devons made a distinction between three different kinds of "things", any of which might be being applied: * theoretical models; * commonsense axioms, and * theoretical concepts.


Journals


''The Journal of Applied Economics''

The Journal of Applied Economics publishes original contributions on applied issues in micro and macroeconomics. The primary criteria for selecting papers are quality and importance for the field. Papers based on a well motivated research problem that make a concrete contribution to empirical economics or applied theory are especially encouraged.


''Applied Economics''

''Applied Economics'' is a journal that interprets its subject area as "the application of economic analysis to specific problems in both the public and private sectors" and seeks to publish "quantitative studies, the results of which are of use in the practical field" and thus may help "bring economic theory nearer to reality"; ''Applied Economics'' is a leading peer-reviewed journal in economics and its practical applications.


''American Economic Journal: Applied Economics''

This quarterly journal which began publication in 2009 is from the
American Economic Association The American Economic Association (AEA) is a learned society A learned society (; also known as a learned academy, scholarly society, or academic association) is an organization that exists to promote an discipline (academia), academic discip ...
. It publishes papers on a range of topics in applied economics, particularly empirical microeconomic issues, such as in labor economics, development microeconomics, health,
education Education is the process of facilitating learning, or the acquisition of knowledge, skills, value (ethics), values, morals, beliefs, habits, and personal development. Educational methods include teaching, training, storytelling, discussion ...
,
demography Demography (from prefix ''demo-'' from Ancient Greek Ancient Greek includes the forms of the used in and the from around 1500 BC to 300 BC. It is often roughly divided into the following periods: (), Dark Ages (), the period ...
, empirical corporate finance, empirical studies of trade, and empirical
behavioral economics Behavioral economics (also, behavioural economics) studies the effects of psychological Psychology is the scientific Science () is a systematic enterprise that Scientific method, builds and organizes knowledge in the form of Te ...
.


''American Journal of Agricultural Economics''

These journals are published by the
Agricultural & Applied Economics Association The Agricultural & Applied Economics Association (AAEA) is a professional association for those interested in the field of Agricultural economics, agricultural and applied economics. It publishes two journals, the ''American Journal of Agricultur ...
. The ''American Journal of Agricultural Economics'' has been produced since 1919, and publishes research in the "economics of agriculture and food, natural resources and the environment, and rural and community development throughout the world".


''Applied Economics Perspectives and Policy''

Applied Economic Perspectives and Policy (AEPP) is the leading peer-reviewed journal of applied economics and policy. Published four times per year by
Oxford University Press Oxford University Press (OUP) is the university press A university press is an academic publishing Publishing is the activity of making information, literature, music, software and other content available to the public for sale or for fre ...

Oxford University Press
, it is the one of two journals published by the Agricultural & Applied Economics Association (AAEA), along with the American Journal of Agricultural Economics (AJAE). Today is the leading journal in 'applied economics' with a 2011 impact factor of 1.552. The purpose of AEPP is to analyze areas of current applied economic research in an effort to inform the policy-makers and decision makers; and to generate connections between sub-fields of agricultural and applied economics in order to focus future research and increase knowledge of those in the field about the impact of public policy.


Critique

Backhouse and Biddle argue that the mainstream view, that there is an accepted "theoretical core" and that this can be applied in a range of areas, relies on this core having specific characteristics – namely, that it has a wide scope and can be developed independently of individual applications. But they note that as with the definition of applied economics itself, there are within the economics profession differing views as to what belongs in the core – where one draws the line between research that is contributing to the core and research that is applying the core, and the relative importance or significance of research on topics in the core versus applied economics research. Some examples of the problems of applied economics from various fields and issues: * Examples of problems of applied economics:
Macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred ...
One example of this is macroeconomics. In the 1960s and 1970s, macroeconomics was a part of the core of the subject. Why? Because macroeconomics was not only sufficiently important to be part of any economist's training, but also embodied a set of concepts and principles not found in microeconomic theory. However the replacement of Keynesian approach to macroeconomics with new classical macroeconomics and its successors, macroeconomics might now be regarded by the mainstream as merely an application of microeconomic theory. * Examples of problems of applied economics:
Development Economics Development economics is a branch of economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services ...
Another example is the situation within Development Economics. Throughout the 1950s and 1960s most development economist regarded the application of standard "core" microeconomic theory to their area as being entirely inappropriate. An alternative set of models provided their core. This might be best described as the structuralist approach. More recently development economics texts have provided applications of mainstream core theory. * Examples of problems of applied economics: Comim uses the history of the economics of growth in order to illustrate the historical nature of the concept of applied economics. He first discusses the perspective of the theorists’ views of the applied dimension of their work and examines each from the perspective of the work carried out at the Department of Applied Economics (DAE) at Cambridge University. He emphasizes the divergences concerning economists’ understanding of the proper use of economic theory, divergences that might ultimately reveal the influence of distinct practices as far as applied economics is concerned and the role of institutional environments. * Examples of problems of applied economics: the
Minimum-wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most List of minimum wages by country, countries had introduced minimum wage legislation b ...
controversy Leonard notes one area of disagreement amongst applied economists which became famous in the US. That was the minimum-wage controversy. He notes that the fierceness of this controversy was odd because the likely effects were small and that several seemingly more important policy issues such as (entitlement reform, health insurance, CPI calculation) generated nothing like the storm. His explanation is that while this controversy was not especially important to the economy, it was very important to economics and economics as a policy science. His explanation for this is that minimum wage research came to be seen as a test of the usefulness of applying neoclassical price theory to the wages and employment. In other words, it was not just a technical quarrel over such things as the sign and size of wage-elasticity but rather an installment in a long running methodological dispute over whether neoclassical price theory is in reality of any use. * A critique of the dominance of
econometrics Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of Econ ...

econometrics
Swann (2006) queries the dominance of such econometric techniques within Applied Economics and suggests what he describes as the "vernacular of the everyday practice of economics" should be taken seriously. Swann points out that econometrics's privileged position has not been supported by its disappointing results and rather suggests other applied techniques, the vernacular, are also worthy of consideration. These approaches to applied economics, include simulation,
engineering economics ''For the application of engineering economics in the practice of civil engineering Civil engineering is a professional engineering Regulation and licensure in engineering is established by various jurisdictions of the world to encourage pu ...
, case studies and common sense.


See also

* Applied anthropology *
Applied physics Applied physics is the application of physics Physics is the natural science that studies matter, its Elementary particle, fundamental constituents, its Motion (physics), motion and behavior through Spacetime, space and time, and the ...
*
Applied Statistics Statistics is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data Data (; ) are individual facts A fact is something that is truth, true. The usual test for a statement ...
*
Applied theology Practical theology is an academic discipline that examines and reflects on religious practices in order to understand the theology enacted in those practices and in order to consider how theological theory and theological practices can be more full ...


Notes


References

* Begg, I and S. G. B. Henry (1998). ''Applied Economics and Public Policy'', Cambridge University Press
Description.
* Campbell, M. (1989). "Sources of Controversy in Applied Economics." In ''Controversy in Applied Economics'', edited by M. Campbell, M. Hardy, and N. Healey. New York: Wheatsheaf. * Department of Applied Economics (1948). "First Report: Activities in the Years 1946–1948." Cambridge: University of Cambridge, . * Dow, S. (1987). "The Scottish Political Economy Tradition. Scottish Journal of Political Economy'', 34(4), pp. 335–48. * Harcourt, G. C., and M. Kitson (1993). "Fifty Years of Measurement: A Cambridge View". ''Review of Income and Wealth'', ser. 39, no. 4, December, 435–47. * ''History of Political Economy'' (2000). ''Toward a History of Applied Economics''. Annual Supplement, Volume 32. Durham, NC and London: Duke University Pres

* Robinson, J. (
974 Year 974 ( CMLXXIV) was a common year starting on Thursday A common year starting on Thursday is any non-leap year A leap year (also known as an intercalary year or wikt:bissextile, bissextile year) is a calendar year that contains an additi ...
1979). "History versus Equilibrium." In vol. 5 of ''Collected Economic Papers''. Oxford: Basil Blackwell. * Schabas, M. (2001). "Economics, History of," sect. 3 Applied Economics, ''
International Encyclopedia of the Social & Behavioral Sciences The ''International Encyclopedia of the Social & Behavioral Sciences'', originally edited by Neil J. Smelser and Paul B. Baltes, is a 26-volume work published by Elsevier. It has some 4,000 signed articles (commissioned by around 50 subject editor ...
'', pp. 4152–4158
Abstract.
* Swann, G. M. P. (2006). ''Putting Econometrics in Its Place: A New Direction in Applied Economics'', Edward Elga
Description.
{{Economics , expanded Interdisciplinary subfields of economics Economic methodology
economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interact ...