Applied economics – definition and meaning
Applied economics is the study of economics in world situations as opposed to the theory of economics. It is the application of economic principles and theories to real situations, and trying to predict the outcomes.
Put simply; applied economics is the study of observing how theories work in practice. The discipline may be practiced at *macroeconomic or *microeconomic levels.
** ‘Macroeconomics’ refers the whole aggregate economy, while ‘microeconomics’ looks at economics at the individual consumer company level.
Applying economics to the status of the economy of a country helps eliminate all attempts to dress it up. In other words, applied economics prevents making situations appear better or worse than they are.
Economic Theory is all about thinking things up, while Applied Economics is about trying things out.
Only with applied economics can a true and complete picture of an economic situation or theory emerge. Then, decision-makers can choose what to do to move in the right direction from a current position.
The University of Maryland said that a background in applied economics allows people to make informed future trends forecasts.
“Evidence-based policy making replaces ideology with careful definition of problems, collection and analysis of data, and well-reasoned program evaluations.”
“Professionals who can analyze and interpret sophisticated economic data and intelligently apply economic theory are able to better assess the economic impact of key public policy questions.”
Economic historians say that the term emerged nearly 200 years ago, in the writings of French economist and businessman Jean-Baptiste Say (1767-1832). Additionally, British political economist, philosopher, and civil servant John Stuart Mill (1806-1873) also mentioned the term.
Mr. Say wrote about applying the general principles of political economy. In 1848, Mr. Mill used the term in his work Principles of Political Economy with Some of Their Applications to Social Philosophy.
Should I study Economics or Applied Economics?
When wondering whether to study Economics or Applied Economics at university, bear in mind, the two courses are quite different. In fact, applied economics covers fewer core theoretical modules and more applied modules compared to economics.
According to the University of St. Andrews in Scotland:
“This (Applied Economics degree) provides the student with a broader perspective on the application of economic theory to real world issues but less knowledge of core economic theory.”
On its website, Duke University says Applied Economics is for people seeking a broad understanding of economics. Students have to study several aspects of economic theory. However, they will also have considerable freedom in their elective courses.
Duke University adds:
“Students are encouraged to take graduate field courses in areas of interest, such as labor economics, environmental economics, urban economics, econometrics, or international economics. Students who pursue this track often go on to work at think tanks, in consultancies, and in government agencies or research centers.”
Put simply, economics is the study of theories, while applied economics is observing what happens when you test them. We call the testing of economic theory with statistical and mathematical methods econometrics. However, both degree courses offer very similar career opportunities.