Inductive method (Inductive Reasoning) is an important method used by the economist for making conclusions on economic phenomena. It involves the process of reasoning from particular facts to the general principles. Bacon defined method as “an ascending process comprising collection of facts, arranging them and drawing general, conclusions from them“.
Inductive method was popularized by the German Historical School of Economists like Roscner, Hilderbrand, Frederick List. It was also popularized by Cliff Laslie, a British Economist:
When compared to deductive method, inductive method is considered to be the more realistic, concrete and accurate method. It helps in future inquiries and acts as a guide for future inquiries. It helps in future investigation through discovery and evidence of general principles. Under this Inductive method (Inductive Reasoning) the economic phenomena are tested and general conditions are drawn through four stages namely :
(a) Observation
(b) Formation of hypothesis
(c) Generalization and
(d) Verification.
Inductive method (Inductive Reasoning) adopts statistical and mathematical methods for getting conclusions regarding economic phenomena. Several laws in Economics like Malthusian Theory of Population, Engel’s Law of Family Expenditure etc. were based on this method. For example Malthus developed his Theory of Population after examining the trends in population growth of various countries. Similarly Engel enunciated his famous law of Family Expenditure after careful observation and study of budgets of different families.
Inductive method (Inductive Reasoning) is also described as Historical method or Realistic method.
This method is more realistic as it is based on facts. It explains the facts without any distortion. Inductive method (Inductive Reasoning) is more concrete and synthetic since it deals with the subject as a whole without dividing it into various components. It is related to time and place.
This method is considered as a complimentary to the deductive analysis of economic phenomena. The conclusions drawn by deductive method can be verified by this method. This helps us to get accurate and definite information regarding economic phenomena.
