Economics

Merits and Demerits Of Static Analysis In Economics

Economic statics denotes the relationship between two economic variables that relate to the same point of time. It is a timeless analysis. It assumes the simultaneous adjustment of indices. It gives only a stand still picture of an economy, a vision of the movement, disappearing as soon as it makes its appearance. Economic Dynamics is concerned with the changes in the expected values of the variables. Merits and Demerits Of Static Analysis are discussed below.

Merits and Demerits Of Static Analysis:

Merits Of Static Analysis:

Economic statics has the following merits:

1. Simplicity. Economic statics explains the relationship between two variables in a simple way by assuming that other things remaining the same. It helps us to understand all aspects of the economic system in a simple way.

2. Clarity: Economic statics analyses the various economic phenomena with great clarity and precision. Because it studies the economic phenomena in isolation with the past and the future through higher degrees abstraction.

3. Hypothetical model : Economic statics studies the economic phenomena on the basis of hypothetical models. It assumes a state of unchanging ability. This helps us in estimating the consequences of certain values.

4. Provides us the end view: Economic statics provides us the ens view of the forces in operation. Sometimes the end view is more significant than what happens along the path to the end.

5. Step to reality: Robinson remarked that this method solves the problem of the real world in a stage by stage manner.

6. Allocation of inputs: Economic statics help the producers to allocate their inputs for maximizing output. It also analyses how consumers allocate their income while purchasing various commodities.

7. Simplifying process: Economic statics helps us in simplifying the economic phenomena by adopting or taking one-at a-time procedure.

8. Comparative statics: Economic statics helps us to compare the equilibrium positions of different variables.

9. Investigations : The classical economists used this method for studying the economic phenomena. They assumed static conditions for purpose of investigation.

10. Economic Principles : Economists regarded economic statics as the basis for explaining several theories of Economics. Robbins’ definition of Economics, Hick’s ‘Value and Capital’, Joan Robinson’s ‘Economics of Imperfect Competition’ etc. are some of theories that are developed on the basis of Economic Statics.

Demerits Of Static Analysis:

In spite of the merits, Economic Statics has the following limitations-

  1. Far from reality: Economic statics is not a real method of economic analysis. It assumes that certain variables like size of population, methods of production, tastes and fashions of consumers etc, remain constant. But these variables change frequently in reality.
  2. Ignores the role of time element: Economic statics is based on the assumption of unchangeability or constancy in time. It analyses economic phenomena at a given point of time. It ignores the fact that time will not remain stand still for any individual. Hence static analysis has limited scope.

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