CHAPTER 7
A SIMPLE MODEL

THE processes leading to the production and distribution of wealth which are going on around us to-day are intricate and the connections between various elements in the economy are interwoven with each other in a highly complicated manner. It is impossible to reduce economic theory to a set of simple hypotheses which can each be tested separately, like hypotheses about, say, the cause of a disease or the effects of a constituent of diet upon growth. Moreover, since human beings do not live, like the robins, in a timeless present, but plan their actions with a view to future consequences, most causal elements in economic life lie partly in the beliefs and expectations (often vague and emotional) of the actors and are very hard, if not impossible in principle, to pin down by any scientific observation. For these reasons it can be plausibly maintained that economics is not and never will be a serious scientific discipline, and that it properly belongs to the class of subjects, such as theology or aesthetic criticism, which use words to play upon sentiment rather than to investigate reality.

Against this view, however, it can be argued that economics, as it has been developed, does throw light on particular problems, such as the causes of price movements, the effects of taxation upon the distribution of wealth, and the effects of national policies designed to maintain employment or to maintain solvency in the international transactions of a country. The purpose of economic theory, of the generalised kind set out in the book, is to provide a framework within which such particular questions can be usefully discussed.

The method of analysis which has been developed in economic theory is to set up a highly simplified model of an economy, which is intended to bring into an orderly scheme

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