Law Economic

<em><strong>Law</strong></em>  Economic

Law , Economic, a statement of a general uniformity in the relationship between two or more phenomena of economic life, for example, the generalization, 'other things remaining the same, the marginal utility of a commodity to anyone diminishes with every increase in the amount he already has'.

Economic laws of this kind are positive or behaviourist; they describe what happens, not what ought to happen. They are therefore distinct from normative (moral or juristic) laws, which imply a command or a recommendation that stated courses of action should be preferred to others. There are, however, many instances in economic literature of propositions stated as economic 'laws' which are nominative propositions. This is particularly true of statements about 'welfare'. The proposition that the removal of import restrictions increases total economic welfare in a nation, whether it can be given a precise meaning or not, is normative; if it were presented as a 'scientific' judgment to a policy-maker it would imply a recommendation to free trade. This is the result of the moral associations of the word 'welfare'. It is possible to dispute the status of some propositions in economics. Some economists, for example, would say that 'the removal of import restrictions will tend to increase total real national output' is a positive statement, others that it is like the previous statement and for a similar reason normative.

Economic laws which have the same scientific status as the 'laws of physics' are therefore positive, not normative. But not all valid, positive propositions about the relationships between two or more economic variables can be described as economic laws. A law must be capable of being applied widely; thus the statement that 'other things equal, a rise in the price of a commodity will lead to a fall in the quantity demanded' has sufficient generality to be called a law.

Many of the laws of economics may be stated as truisms or elaborations of truisms. As long as they are put in this way they have no empirical content, i.e. tell us nothing about the real world which can be tested. At the other extreme, propositions in economics may he formulated simply as statements of historical fact. Both terms are useful. A generalization about markets which asserts the existence of certain relationships or tendencies in the real world that can be tested by factual observation is useful: in turn the validity of such a generalization rests on accurate assumptions about individual behaviour in practice.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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