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Qualitative economics is the representation and analysis of information about the direction of change (+, -, or 0) in some economic variable(s) as related to change of some other economic variable(s). For the non-zero case, what makes the change qualitative is that its direction but not its magnitude is specified.^[1]

Typical exercises of qualitative economics include comparative-static changes studied 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({\overset {+}{M}})\quad \!

or

\quad {\frac {df(M)}{dM}}>0.

where the '+' indexes a positive relationship of GDP to M, that is, as M increases, GDP increases as a result.

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({\overset {-}{T}})\quad \!

or

\quad {\frac {df(T)}{dT}}<0.

That is, as T increases, GDP decreases as a result. 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({\overset {+}{M}},{\overset {-}{T}})\,\!\quad

or

\quad {\frac {\partial f(M,T)}{\partial M}}>0,\quad

{\frac {\partial f(M,T)}{\partial T}}<0.

Qualitative hypotheses occur in earliest history of formal economics but only as to formal economic models from the late 1930s with Hicks's model of general equilibrium in a competitive economy.^[2] A classic exposition of qualitative economics is Samuelson, 1947.^[3] There Samuelson identifies qualitative restrictions and the hypotheses of maximization and stability of equilibrium as the three fundamental sources of meaningful theorems — hypotheses about empirical data that could conceivably be refuted by empirical data.^[1]

Notes

^ ^a ^b James Quirk, 1987. "qualitative economics," The New Palgrave: A Dictionary of Economics, v. 4, p. 1.
^ J. R. Hicks, 1939. Value and Capital. Oxford.
^ Paul A. Samuelson, 1947. Foundations of Economic Analysis, pp. 5, 21-29.

References

J. R. Hicks, 1939. Value and Capital. Oxford.
Kelvin Lancaster, 1962. "The Scope of Qualitative Economics," Review of Economic Studies, 29(2), p p. 99-123.
- W.M. Gorman, 1964. "More Scope for Qualitative Economics," Review of Economic Studies, 31(1) p p. 65-68.
James Quirk, 1987. "qualitative economics," The New Palgrave: A Dictionary of Economics, v. 4, pp. 1–3.
_____ and Richard Ruppert, 1965. "Qualitative Economics and the Stability of Equilibrium," Review of Economic Studies, 32(4), p p. 311-326.
Paul A. Samuelson, 1947. Foundations of Economic Analysis, Harvard University Press. ISBN 0-674-31301-1

[Quirk1987-1] James Quirk, 1987. "qualitative economics," The New Palgrave: A Dictionary of Economics, v. 4, p. 1.

[2] J. R. Hicks, 1939. Value and Capital. Oxford.

[3] Paul A. Samuelson, 1947. Foundations of Economic Analysis, pp. 5, 21-29.

[1]

[2]

[3]

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+{{Technical|date=August 2017}}
-'''Qualitative economics''' refers to representation and analysis of information about the direction of change (+ or -) in at least one economic variable as related to change of at least one other economic variable (James Quirk, 1987, p. 1).  Variables may be [[Continuous function|continuous]] or [[Discrete mathematics|discrete]].  [[GDP]] approximates a continuous variable.  Discrete variables may describe discrete ''states'' (such as being at war or not in a given year) or  discrete ''choices'' (such as buying a car or not in a given year).
+'''Qualitative economics''' is the representation and analysis of information about the direction of change (+, -, or 0) in some economic variable(s) as related to change of some other economic variable(s).  For the non-zero case, what makes the change  ''qualitative'' is that its direction but not its magnitude is specified.<ref name="Quirk1987">James Quirk, 1987. "qualitative economics," ''The [[New Palgrave: A Dictionary of Economics]]'', v. 4, p. 1.</ref>
-There are two distinct usages of 'qualitative economics'.  One usage considers theoretical and [[econometric]] representation of discrete variables such as with [[dummy variable]]s or [[Discrete choice|qualitative-choice]] models of discrete variables.  The qualitative-choice models are in a [[probabilistic]] or [[odds-ratio]] form.
-In the second usage, what makes the change of a variable ''qualitative'' is that the direction but not the magnitude of the change is specified. Typical exercises here include [[Comparative statics|comparative-static]] changes and comparative equilibrium states in a [[Exogenous growth model |macroeconomic growth model]].
+Typical exercises of qualitative economics include [[Comparative statics|comparative-static]] changes studied in [[microeconomics]] or [[macroeconomics]] and comparative equilibrium-growth states in a [[Exogenous growth model|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#Scope|money supply]]
+:''T'' = [[Macroeconomic policy instruments#Fiscal policy|total taxes]].
+[[quantity theory of money|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]]:
+: <math> GDP = f(\overset{+}{M}) \quad\! </math> or <math>\quad\frac{ df(M) }{ dM} > 0.</math>
-A very simple example illustrating a qualitative change is the following for a [[macroeconomic]] model of [[GDP]].  Let ''M'' be the [[money supply]].   The [[quantity theory of money]] hypothesizes a [[Direct relationship|positive relationship]] between ''GDP'' the [[dependent variable]] and ''M'' the [[independent variable]].
+where the '+' indexes a positive relationship of ''GDP'' to ''M'', that is, as ''M'' increases, ''GDP'' increases as a result.
+Another [[Model (economics)|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:
-Equivalent ways to represent such a '''qualitative relationship''' between them are with signed functional notation or with [[derivative]] notation:
-:::::        <math>+  \,\! </math>
-: <math> GDP = f(M) \,\! </math>  <math> or \,\! </math> <math>\frac{ df(M) }{ dM} > 0.</math>
-where the '+' indexes a positive relationship.
+: <math> GDP = f(\overset{-}{T}) \quad\! </math>  or <math>\quad\frac{ df(T)}{ dT} < 0.</math>
-Another simple model of GDP hypothesizes that ''GDP'' is a [[inverse relationship|negative]] function of total taxes ''T''. The relationship can be similarly represented (with a theoretically appropriate sign change compared to the first example):
+That is, as ''T'' increases, ''GDP'' decreases as a result.
-:::::<math> -  \,\! </math>
+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 derivative]]s (suitable for more than one independent variable):
-: <math> GDP = f(T) \,\! </math>  <math> or \,\! </math> <math>\frac{ df(T)}{ dT} < 0.</math>
+:<math> GDP = f(\overset{+}{M},\overset{-}{ T}) \,\! \quad </math> or  <math>\quad\frac{\partial f(M, T)}{\partial M} > 0,\quad </math> <math>\frac{\partial f(M, T)}{\partial T} < 0.</math>
-A combined model uses both ''M'' and ''T'' as independent variables.  The hypothesized relationships can be equivalently represented with signed functional notation or with [[partial derivative]] notation (suitable for more than one independent variable):
-:::::         <math>+  \,\! </math>     <math>         - \,\! </math>
-:<math> GDP = f(M, T) \,\! </math>  <math> or \,\! </math> <math>\frac{\partial f(M, T)}{\partial M} > 0,</math> <math>\frac{\partial f(M, T)}{\partial T} < 0.</math>
-where the signs index the hypothesized relationships of ''GDP'' to ''M'' and ''T'' respectively.
+Qualitative hypotheses occur in earliest history of formal economics but only as to formal economic models from the late 1930s with Hicks's model of [[general equilibrium]] in a competitive economy.<ref>[[J. R. Hicks]], 1939. ''[[Value and Capital]]''. Oxford.</ref> A classic exposition of qualitative economics is Samuelson, 1947.<ref>[[Paul A. Samuelson]], 1947. ''[[Foundations of Economic Analysis]]'', pp. 5, 21-29.</ref> There Samuelson identifies qualitative restrictions and the hypotheses of [[Maxima and minima|maximization]] and stability of [[Economic equilibrium|equilibrium]] as the three fundamental sources of ''meaningful'' theorems — hypotheses about empirical data that could conceivably be refuted by empirical data.<ref name="Quirk1987"/>
-A classic exposition of qualitative economics in the second usage is Paul A. Samuelson (1947).
-==See also==
+==Notes==
-*[[Discrete choice]]
+{{Reflist}}
-*[[Dummy variable]]
-*[[Logit]]
-*[[Probit]]
-*[[G.S. Maddala]]
-*[[Daniel McFadden]], winner of the [[Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel|Nobel Prize]] for a particular logit model used in economics
 ==References==
+* [[J. R. Hicks]], 1939. ''[[Value and Capital]]''. Oxford.
-*James Quirk, 1987. “qualitative economics," ''The New Palgrave: A Dictionary of Economics'', v. 4, pp. 1-3
+* [[Kelvin Lancaster]], 1962. "The Scope of Qualitative Economics," ''Review of Economic Studies'', 29(2),  p [https://www.jstor.org/pss/2295817 p. 99]-123.
-*Paul A. Samuelson (1947). ''[[Foundations of Economic Analysis]]'', Harvard University Press. ISBN 0-674-31301-1
+**W.M. Gorman, 1964. "More Scope for Qualitative Economics," ''Review of Economic Studies'', 31(1)  p [https://www.jstor.org/pss/2295936 p. 65]-68.
+* James Quirk, 1987. "qualitative economics," ''The [[New Palgrave: A Dictionary of Economics]]'', v. 4, pp.&nbsp;1–3.
+* _____ and Richard Ruppert, 1965. "Qualitative Economics and the Stability of Equilibrium," ''Review of Economic Studies'', 32(4), p [https://www.jstor.org/pss/2295838 p. 311]-326.
+* [[Paul A. Samuelson]], 1947. ''[[Foundations of Economic Analysis]]'', Harvard University Press. {{ISBN|0-674-31301-1}}
-[[Category:Mathematical economics]]
+[[Category:Comparative statics]]
 [[Category:Mathematical and quantitative methods (economics)]]
-[[Category:Single equation methods (econometrics)| ]]