Topic: Deduction and Induction Method in Economics

In this post, you'll learn about basic theory of Deduction & Induction Method.

Refer to Disclaimer before proceeding

Deduction Method

In deduction method, logic moves at general level is applicable to particular level.

In additional words duction means reasoning or inference from the general to the particular or from the universal to the individual. The deductive method derives new conclusions from fundamental assumptions or from truth established by other methods. It involves the process of reasoning from certain laws or principles, which are assumed to be true, to the analysis of facts.

Example:

• Let there be 360 degrees in circle – (A general assumption)

Merits of Deductive Method:

• Deductive method is exceedingly simple: We can understand this by example of law of marginal utility which states that a commodity goes on diminishing with every successive addition through which we draw logical conclusions with self-evident truth.
• Deductive method results in accuracy and exactness in generalization, because of logical reasoning. The method gives a very high standard of precision in abstract economic reasoning.
• Deductive method obviates the necessity of experimentation. Economics being a social science, experimentation may not be available as in the case of physics or chemistry.

Demerits of Deductive Method:

• It is based mainly on assumptions which are perfectly valid. If assumptions are wrong, generalizations made on the basis of wrong assumptions will be imperfect and invalid.
• There is too much of abstraction and economists by means of their intellectual exercises having little connection with reality.
• Deductive generalizations started on wrong premises will be dangerous when generalization claims universal validity.

Induction Method

In Induction method, logic moves at particular level is applicable to general level.

In additional words, Induction “is the process of reasoning from a part to the whole, from particulars to generals or from the individual to the universal.” Bacon described it as “an ascending process” in which facts are collected, arranged and then general conclusions are drawn.

Example:

• This apple falls to the ground. (A particular observation)
• All apples fall to the ground. (More observations)

Merits of Induction Method:

• It is highly practical add realistic as it describes things as they are.
• It is helpful in verifying the conclusions of the deductive method.
• Economic laws under this method are not universal but valid only under certain conditions.

Demerits of Induction Method:

• When the investigators lack a balanced judgement there is the risk of drawing hurried conclusions based on inadequate and irrelevant facts and data.
• Collection of facts in the inductive process is a highly complex and complicated job warranting extraordinary understanding to alienate economic from non-economic factors.
• Induction alone will not deliver goods unless it is supplemented by means of deductive reasoning. Without deduction, the inductive method would result in producing only a mass of unrelated and unconnected facts.