1. The Scientific Method Positive Vs. Normative Economics
Necessary & Sufficient Conditions
Testing Causality
Fallacious Arguments
Testing Theory

2. Positive Vs. Normative Economics
Positive Economics
Statements of fact & logical deductions
Ex: If it rains the football field will get wet.
Normative Economics
Statements about what should be (value judgments)
Example: The football field is better when it is wet.

3. The Scientific Method Carefully study it. Observe a
Systematic Observation
& Measurement
Confirm / Re-examine
Not
Prove or Disprove
Observe a
Phenomenon
Develop a theory to explain the data
Check the implications of your theory against new data from similar
circumstances

4. Necessary & Sufficient Conditions
A is said to be a sufficient condition for B. If A happens B will be guaranteed to occur.
EX: Ceteris Paribus, if it rains then the football field will be wet. Necessary & Sufficient Conditions.

5. Testing Causality
If A is observed and ceteris paribus B does not occur then the idea that A causes B is called into question.
EX: Theory: C.P. Price is negatively related to quantity demanded.
We observe price falling and ceteris paribus quantity demanded also falls. Does the data support the theory?

6. Testing Causality
Econometrically we can estimate an equation for demand.
Q = f(Price, Income, Other Variables)
What is the predicted sign on the coefficient of price? (Is it significant?)

7. Fallacies Denying the antecedent: Affirming the consequent:
It did not rain therefore the football field cannot be wet (How about a sprinkler system?)
Affirming the consequent:
The field is wet therefore it must have rained.
(Sprinklers may have been on)

8. Contrapositive
The only logical equivalent to A=> B is the contrapositive statement ~B => ~A.
EX1: If it rains then the field will be wet.
(Contrapositive) The field is dry therefore it did not rain.
EX2: If cigarettes are addictive then past consumption influences present consumption.
(Contrapositive) If past consumption does not influence present consumption then cigarettes are not addictive.

9. Competitive Balance in the NFL
Measuring Competition: HHI =  (MSi)2
MSi = Market Share for a Team
= (Wins for that team / # of League Games)

11. Factors Affecting Competition
HHI = f (FA/SAL, EXPAN, EXPAN(1)
STRIKE, PLAYER TALENT, HHI(-1))
FA/SAL = Free Agency/ Salary Cap Year 1993
EXPAN= Expansion Year
EXPAN (1) = Year after expansion
STRIKE = Strike Year
Player Talent Concentration

12. PLAYER TALENT = HHIPF + HHIPA
HHIPF =  (Points Scoredi / Total Points Scored in the League)2
HHIPA =  (Points Scored Againsti / Total Points Scored Against in the League)2

13. Results