Qualitative economics

Qualitative economics refers to representation and analysis of information about the direction of change (+, 0, or -) in at least one economic variable as related to change of at least one other economic variable (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 here include comparative-static changes in microeconomics or macroeconomics and comparative equilibrium states in a macroeconomic growth model.

A simple example illustrating qualitative change is from standard macroeconomic theory. Let:

GDP = gross domestic product

M = money supply

T = total taxes.

The quantity theory of money 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 with a signed functional relation or with a signed derivative:

$+\,\!$

$GDP=f(M)\,\!$ $or\,\!$ ${\frac {df(M)}{dM}}>0.$

where the '+' indexes a positive relationship of GDP to M.

Another simple model of GDP hypothesizes that GDP has a negative relationship to T. This can be represented similarly to the first example, 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 with signed functional notation or with partial derivative notation (suitable for more than one independent variable):

$+\,\!$ $-\,\!$

$GDP=f(M,T)\,\!$ $or\,\!$ ${\frac {\partial f(M,T)}{\partial M}}>0,$ ${\frac {\partial f(M,T)}{\partial T}}<0.$

where the signs index the hypothesized relationships of GDP to M and T respectively.

A classic exposition of qualitative economics is Paul A. Samuelson (1947).

References

• James Quirk, 1987. “qualitative economics," The New Palgrave: A Dictionary of Economics, v. 4, pp. 1-3
• Paul A. Samuelson (1947). Foundations of Economic Analysis, Harvard University Press. ISBN 0-674-31301-1