The Research Process

1. The Research Process Fun and Excitement for Economics Majors!!!

2. What is the point of theory? • Prediction • Understanding

3. What is a theory? • A theory is a coherent set of propositions used as principles of explanation of the apparent relationships of certain observed phenomena • Examples - theory of consumer behavior - maximize utility, theory of the firm - maximize profits

4. What is an hypothesis? • A proposition that is empirically testable • Example: increasing labor quality increases productivity • Leads to need to concretely define concepts, e.g., productivity (Q/L) • Hypothesis testing can lead to support or refutation of a theory

5. Stages in building theories and applying the scientific method • Assessing existing knowledge (literature review) • Formulating concepts and propositions (developing a model) • Stating an hypothesis • Designing the research to test the hypothesis • Acquiring the data • Analyzing the data and evaluating the results • Providing an explanation and stating new research questions

6. Types of Research: • Basic Research • Applied Research

7. Basic Research • Conducted for the purpose of developing theory • Approach may be verbal, graphical or mathematical • May inspire others to “test” the theory • May be inductively or deductively based upon observations about the behavior of variables

8. Applied Research • Tests a theory or theories • May compare two or more theories • May simply add support to or refute a theory • Replication on different data or different circumstances is desirable to “reproduce” results and test generalizability of theories

9. Types of Applied Research • Descriptive • Case Study • Survey Research • Content Analysis • Correlation • Regression Analysis (Econometrics) • Mathematical Programming

10. Descriptive Research • Designed to determine the current status of a subject of study • Often preliminary to other types of research • Often used to persuade the reader • Example: overview of Asian economic crisis, survey of world car market

11. Case Study • In-depth investigation of an individual, group or institution • Widely used in business to analyze successes and failures • Aimed at finding out “why”. Ex. How has Starbucks managed its rapid expansion during the 1990’s

12. Survey Research • Collecting data from a sample population to test economics theory or ascertain economic values • Experimental - create a hypothetical market situation and observe behavior to test an hypothesis

13. Content Analysis • Tries to judge support for a theory from analyzing the “content” of writings

14. Correlation • Involves collecting and analyzing data to determine whether, and to what degree, variables move together • Does not imply causality although often interpreted that way • Examples - family wealth and educational attainment, sunspots and economic output

15. Regression Analysis • More sophisticated form of statistical analysis which controls for the effects of other variables in relationship hypothesized to be causal • Examples - demand curve, relationship between money supply and interest rates

16. Mathematical Programming • Develop a set of equations describing an economic system and, using a computer, run the model to study how the system works • Optimization - linear programming • Simulation - ithink

17. That’s all Folks!!!

18. What Makes A “Good” Topic? • It’s “doable” - data is available, you understand the methodology, it can be done in the time available. • It’s specific, not vague or general. • The question can be answered. • It’s topical - there’s current interest in it. • It matters - it has societal significance. • Most important: you like it.