Economics, the basic social science that focuses on the processes, inputs, and outputs of a variety of functions in a society, is an important area of study, as it provides the world with current information about the status of a social unit, as well as data that can be analyzed to help with future endeavors. But while this science may yield information to be scrutinized by professionals, these individuals must find a separate mathematical and statistical process to help infer the raw data, thus formulating a visible and usable finished product. And in order to use basic and complex economic data, social scientists employ econometrics, a process that acts as a direct link between economics and the real world.
The Basics of Econometrics
Although economics is a social science itself, econometrics is a set of processes that lies within the boundaries of economics, acting as a tool that can be applied to raw data. Econometrics uses formulas of mathematics, statistics, and even computer science to help economists understand the data they acquire from studies and use it to comprehend the current system, as well as to infer possible outcomes in the future.
Ultimately, econometrics is a process meant to simplify the study of economics, as while economic studies will result in a variety of arbitrary numbers about the current trends occurring in a market or along a demographic line, the application of econometrics morphs these sets of numbers into understandable data sets. And of course, once an economist has access to a usable set of data, it is easy to formulate ideas and theories and even apply future policies in order to benefit those in the market.
|Intro to Econometrics: Stockvault|
The Purpose of Studying Econometrics
Being that it uses complex mathematic formulas to interpret raw data, econometrics is often looked upon as one of the most difficult aspects of economics and is avoided by many of those in the field who believe it to be useless in the future. And, naturally, a student of economics can largely understand the basics of economics and economic theory by taking core classes, such as principles of microeconomics, macroeconomics, and even financial economies.
But while these subjects may give a student a basic or even strong grasp of the function of economic models, they do not allow the student to apply the models to empirical data in order to help formulate a theory or policy. With a comprehensive knowledge of different economic theories, a student is only equipped to work in a hypothetical world, as much of economics ideas work on "perfect-world" scenarios and potential outcomes. The study of econometrics gives students the ability to prove and disprove specific theories and eventually create functioning economic ideas that can be used in real-world situations.
It is in the best interest of any student of economics to focus on understanding economics as a social science while simultaneously receiving a basic or thorough education on econometrics so as to possess a way to combine the two together. For while economics as a science will lead to raw information, it is the study of econometrics that can be used to help change the world.
Vincent Murray writes on economics, finance, business, accounting, banking and other similar topics. Readers who are thinking about entering the financial world should consider viewing the banking jobs with moneyjobs.com.