Qualitative economics

Qualitative economics

Qualitative economics refers to representation and analysis of information about the direction of change (+ or -) in some economic variable(s) as related to change of some other economic variable(s) (James Quirk, 1987, p. 1). What makes the change of a variable "qualitative" is that the direction (signed by a + or -) but not the magnitude of the change is specified.

Typical exercises of qualitative economics include comparative-static changes in microeconomics or macroeconomics and comparative equilibrium-growth states in a macroeconomic growth model. A simple example illustrating qualitative change is from macroeconomics. Let::"GDP" = nominal gross domestic product, a measure of national income: "M" = money supply:"T" = total taxes.
Monetary theory hypothesizes a positive relationship between "GDP" the dependent variable and "M" the independent variable. Equivalent ways to represent such a qualitative relationship between them are as a signed functional relationship and as a signed derivative: ::::: + ,! : GDP = f(M) ,! or ,! frac{ df(M) }{ dM} > 0.where the '+' indexes a positive relationship of "GDP" to "M".

Another model of GDP hypothesizes that "GDP" has a negative relationship to "T". This can be represented similarly to the above, with a theoretically appropriate sign change as indicated:::::: - ,! : GDP = f(T) ,! or ,! frac{ df(T)}{ dT} < 0.

A combined model uses both "M" and "T" as independent variables. The hypothesized relationships can be equivalently represented as signed functional relationships and signed partial derivatives (suitable for more than one independent variable): ::::: + ,! - ,! : GDP = f(M, T) ,! or ,! frac{partial f(M, T)}{partial M} > 0, frac{partial f(M, T)}{partial T} < 0.A classic exposition of qualitative economics is Paul A. Samuelson (1947).

References

*James Quirk, (1987). “Qualitative economics," "The ", v. 4, pp. 1-3
*Paul A. Samuelson (1947). "Foundations of Economic Analysis", Harvard University Press. ISBN 0-674-31301-1


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