Applied economics
There are a variety of approaches including not only empirical estimation using econometrics, input-output analysis or simulations but also case studies, historical analogy and so-called common sense or the "vernacular".[3] This range of approaches is indicative of what Roger Backhouse and Jeff Biddle argue is the ambiguous nature of the concept of applied economics.This school thought that a general body of theory could be established through abstract reasoning – not relying on a wide knowledge of economic facts.[9] Vilfredo Pareto ([1906] 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.This lowering of the level of abstraction may involve:[4] Pesaran and Harcourt (2000) describe Stone's attempt to face the challenge of making economics into a science by combining theory and measurement within a cohesive framework.[12] Stone argued that: 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.Papers based on a well motivated research problem that make a concrete contribution to empirical economics or applied theory are especially encouraged.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.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.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.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.