Significance of Economic Statics

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Significance of Economic Statics

Simplicity. Though economic static is mostly unrealistic and unsuitable for most of the purposes, yet it enjoys the virtue of simplicity which has value of its own. None can deny that the study of the working of a propeller, while it is standing, is much easier than while it is in motion. In the same way, it is not only useful but necessary to possess complete understanding of the each and every part of the economic machine before it moves. Of course, economy can never stop, but it is the beauty of the static analysis that it allows the machine to move but at a constant rate so that the task of understanding is . facilitated. That is why Lcuthen points out that “we should emphasize that static theory has an introductory pcdugugical value.” Clarity. The justification for such a value is to be found in the gain in clarity and the precision that results by studying the economic phenomena. in isolation with the past and the future through higher degrees of abstraction. In Marshall’s words, “Thc economist scgrcgah~s those disturbing causes whose wanderings happen tn he inconvenient for the time being in 1I phrase called “Ct’ll’l’is paribus”. It is a simplifying device. Hypothetical Model. Simplicity and clarity

apart. the method of static analysis provides us with a hypothetical model of the economic phenomena in a state of unchangeability which helps us in comprehending the consequences of certain changes. This. in itself. is of no small value. for the crux of any scientific discipline lies in the discovery of the consequences. The policies can be snapped accordingly to deal squarely with the consequences. End- View. Static theory is a study of the states of equilibria and thus it provides us an end-view of the forces in operation. In a sense. end is more important than what happens along the path to the end. Hence. utility of static theory is beyond question, Behaviour of Variables. Static analysis also provides us with understanding regarding the behaviour of the variables in the economy. Prof. Marshall stresses that the central idea of “equilibrium” is statical rather than dynamical and the analysis of states of equilibria throws valuable light on the likely behaviour of the variables of an economy. For example, the study of equilibrium price tells us about the possible behaviour of the prices in the economy. Likewise. to know how demand and supply affect prices can be better understood when both demand and supply are in an equilibrium  state. Economic static builds up a relationship between demand. supply and price as they are supposed to be  at any given moment; nothing else is considered even though several other things may also be changing.

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Significance of Economic Statics