Economics is a field of study that relates to analyzing various factors that affect a country’s economy. These factors include production, distribution, and consumption of goods and services, collectively termed as value. However, the field of economics usually involves theoretical analysis. When it comes to quantifying these theories, there are several options. These include econometrics and mathematical economics.
What is Econometrics?
Econometrics is a field within economics that deals with applying statistical and mathematical models to analyze economic theories. This field relates to how analysts can test or prove various economic hypotheses through quantification. Analysts that use econometrics to do so are known as econometricians. The primary objective of econometrics is to use statistical and mathematical methods to develop theories or test existing ones.
Econometrics is substantially helpful for analysts that use economic theories for trend analysis or forecasting. During the process, they use tools, such as regression analysis, time series analysis, probability, correlation analysis, etc. Depending on their needs, analysts can use these tools to make predictions and forecast future trends.
Although econometrics involves using mathematical and statistical methods, it still relies on theory. The field exists since the 1970s. However, it has grown over the last 30 years. Most nations depend on econometrics to develop their economic policies and test those policies to assess their impact.
What is Mathematical Economics?
Mathematical economics is a field within economics the involves the use of mathematical principles to develop economic theories. Unlike econometrics, it does not include statistical analysis. Therefore, mathematical economics is more limited when it comes to its application. However, it does not imply that one field is more superior to the other.
Through the use of mathematics, economists can develop accurately defined models using mathematical logic. Based on those models, they can reach conclusions, which they can use statistical models to test. Therefore, mathematical economics can contribute to the data required for analysts to apply in econometrics. Based on these models, analysts can also use statistical tools to make quantifiable predictions about economic activity.
Mathematic economics plays a critical role in allowing economists to develop economic models. It can be significantly helpful when weighing various economic policies against each other and assessing their impact. Overall, mathematical economics helps economists describe an observable phenomenon. By doing so, it allows economists to develop a theoretical interpretation.
What is the difference: Econometrics vs Mathematical Economics?
Econometrics and mathematical economics involve similar areas. Econometrics usually deals with the application of both statistical and mathematical methods to the field of economics. It relates to how economists use these methods to develop or test economic models. It also involves using any interpreted data to make predictions or analyze trends.
Mathematical economics, on the other hand, has limited application. However, it provides the basis for the use of econometrics. Mathematical economics deals with analyzing data using mathematical methods or models. By doing so, it provides the information necessary for economists to use in statistical models and econometrics.
Econometrics and mathematical economics are fields within economics that involve the quantification of economic theories. However, they are both different. Econometrics deals with the use of statistical and mathematical tools to analyze trends and predict future outcomes. Mathematical economics involves the application of mathematical models in the analysis of economic concepts.