Five W’s, an H, and an E: The method of economics based on primary school techniques

I remember when I was a 7 year old sitting around at Kio Kio school and the teacher pulled out the five w’s and an h:  Who, what, where, when, why, and how.  They were repeated constantly, and we were told that these were questions we should repeat all the time.

Now at 7, we were a bit young to understand the gravity of these questions – and no doubt it merely led to annoying situations for our parents.  However, as Wikipedia informs me this is a method of teaching to primary school students – and as I inform me, this is a great way for understanding economics.  So let’s use them.

There are two ways we could use the wh method to understand economics – we could ask these questions about economics, or we could ask how economics deals with these questions.  I’m going to do the second.

What, how, why:  The core of economics

I would say that the questions of “what”, “how”, and “why” make up the building blocks of how economics tries to understand the world.  Essentially, economics is a social science that at its core aims to answer these questions about social situations.

What:  When an economist asks what, they are trying to figure out what the “elements” of a social situation are.  What is scarce in this situation?  What individuals are involved?  What trade-offs exist?  What are the incentives of the individuals?  What are outcomes?

What defines the actors in an economic model – much more than the other potential descriptive questions of “where, who, and when”.

How:  We get onto the how once we have the what – the what gives us the elements, the how allows us to tie them together.  As the Wikipedia page states, this question can really fit into some others – but I like it as an intermediate step, especially since economists often “abstract” from many of the attributes of “where, when, and who”.  How do people make choices?  How does a trade-off get resolved? How do outcomes come to be?

How as a result involves tying together the actors into “a” model – not necessarily an all-encompassing model, but one that takes the elements we pick up in the what question and matches some “observed outcome”.  How is our descriptive question.

WhyWhy is my favourite question – it is the question of a petulant child, and any good economist.  It is all well and good to “describe” what is going on and how it has occurred with knowledge of what elements exist in society.  But we need to ask why to “explain” what is going on, we need to ask why to “understand” what is going on.  We need to ask “why” before we have any basis for changing policy.  Why do people choose that way?  Why does our model suggest a certain outcome?

Why involves looking over a large set of what and how questions, and trying to learn (as much as possible) the “true” nature of the relationship between social elements and outcomes.  It is the why question that makes economists very “two-handed” and it is the why question that makes us more nervous about policy intervention than many people – as unless we can answer the question of why, we cannot say how outcomes will change when policy changes!

Where, who, when:  History dependence

Where, who, and when seem like very important questions – but I haven’t put them in the core of economics.  In this sense, I have used the term “economics” loosely – in truth I mean model building in economics.

Economic history asks these question, books on development economics ask these question, any part of economics that accepts history or path dependence asks these questions constantly.

And to be fair, a vast about of economic modelling looks at these types of issues as well.  Path dependence, state dependence, and history dependence are all words that can be found in a multitude of economic models.

However, I would argue that when it comes to model building these questions take a secondary role.  Economists often turn up to these questions with a defined “method” and “framework” that is based on “what, how, and why” before turning to where, who, and when.

Is this appropriate?  Does this form of analysis make sense?  Does the order we ask questions impact upon our conclusions?

These are good questions.