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We suspect you’ve asked yourself at some point: what the heck is the difference between economics and econometrics? Well, the difference isn’t always clear. Nonetheless, we’ll attempt to explain the difference.
In overly simple terms, economics is that social science bit of an economics degree. Econometrics, on the other hand, is the math or technical side of economics. It uses statistical approaches to analyze economic data.
Also, economics is more theoretical than econometrics. For that reason, economics tends to be easier than econometrics. But that doesn’t necessarily mean economics is easy.
A person who plans to become an economic policy maker in the future should focus on economics. But a person who intends to help companies predict future performance should concentrate on econometrics.
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Econometrics is a complete science. It’s applied economics. Econometrics concerns itself with the application of methods, techniques, and laws of statistics and math to quantify economic phenomenon.
Econometrics works within certain assumptions to provide a deep understanding of the forces that drive certain economic aspects. Also, econometrics predicts how a certain phenomenon might evolve and develop in the future.
Let’s look at a couple common econometrics topics.
- Developing econometric models
- Simultaneous equation models
- Systems analysis
- Control theory
- Regression analysis
- Quasi-experimental methods
- Understanding natural experiments
- Polynomial least squares
- Statistical significance
- Statistical theory
- Mathematical statistics
- Ordinary least squares
- Bayesian statistics
- Maximum likelihood estimation
- Generalized least squares
- Okun’s law
- Multiple linear regression
- Analyzing economic history
- Exploratory data analysis
- Gauss-Markov assumptions
- Applied econometrics
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