Economy is a very special
subject. You cannot test hypothesis through doing the experiment in the
laboratory just like chemistry or physical. Also you cannot test a principle by
do the research questionnaire survey like psychology. Economy is growing
through the history. What caused the Depression? How the government did to
recover the economy? Economist gain the new hypothesis through the question
they have. What happened if we increase the unemployment insurance? What was
the consequent for a government’s policy? How can we increase the national GDP?
What should we do to make everybody better off? However, how they solve the
question? The answer is – data, the compass in the economy.
Economist don’t “create”
definition. They use data to “summary” the definition. When they collected data
about imports’ and exports’ percent of GDP to observe the U.S. economy’s
increasing openness, economist found there always a difference between exports
and imports. When it is smaller than zero, country suffers from “deficit”. To
be the opposite situation, when it is greater than zero, country undergoing
“surplus”. Country faces different problem under those two difference
situation. So to be more convince, economist summary those difference as the
definition “Net export”. This cause a creation for a
new definition—net capital outflow.
To understand deeper to this
definition, Economist change their perspective to this difference. For the
previous one, they think the amount of purchasing goods as variation quantity,
like how many goods that other country buy from domestic (export) or how many
good that domestic buy from other country “import”. Expect goods, they analysis
the situation by using the loose of the domestic fund which is the purchasing
of foreign assets. From the data they collected, they also found the special
relationship between those two data that “that country buy from other country”.
Those are not the only example.
Economist also summary some other definition by analysis the data they
collected. Because of the development of the economy, the price of the goods is
variety through the different generation. After collected so many data, they
want to figure out a method to compare the price in different year so that they
found a new definition “CPI” can do the research more easily. Under this
definition, economist found more diverse economist environment like “deflation”
and “inflection”.
We use data to see an economy
situation more clearly. First, as I post before in the prompt blog #6, people
always think economist have different opinions. To figure out whether this is
true or not, researcher did a survey to some economist. They asked economists’
opinion about some basic proposition, and collected the percentage of
economists who agree. The result is economists all agree the main principle
about the economy.
Also, Trump’s opinion about the unemployment rate is also a good
example. Trump
claim that the unemployment rate which was published by the U.S. government is
unbelievable and the real date should up to 20 to 40 percent. Should we believe it or not? Compare with
number that showed from the Bureau of Labor Statistics, a
unit of the United States Department of Labor. With the help from the
government, they collect date with more patient and the date they collected are
more accurately. And from the picture which I showed on the prompt blog #4, we
known that the data from the BLS is more professional than the Trump’s.
When we wonder about is GDP a useful
measure, we use date to help us again. As a table I showed on the open blog #2,
after we put the GDP and other three measures of the quality of life (life
expectancy, average years of schooling and satisfied with water quality) for
twelve major countries, it is easy to found that the country which has high
GDP, has a higher life equality than the country which has lower GDP.
Without data, economist cannot summary
new definition, cannot see the situation more clearly and cannot make clearer decision
to make everybody better off.
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