InternationalBaccalaureate

DiplomaProgramme
Economics
EconomicsandTheoryofKnowledge
(Forfirstteaching2011,firstexaminations2013)

Theory of knowledge: extracts taken from

Economics guide, (November 2010)
Economics and theory of knowledge
Studentsofgroup3subjectsstudyindividualsandsocieties.Thismeansthattheyexplore
theinteractionsbetweenhumansandtheirenvironmentintimeandplace.Asaresult,these
subjectsareoftenknowncollectivelyasthehumansciencesorsocialsciences.
Aswithothersubjectareas,thereisavarietyofwaysinwhichtogainknowledgeingroup3
subjects. For example, archival evidence, data collection, experimentation, observation,
inductiveanddeductivereasoningcanallbeusedtohelpexplainpatternsofbehaviourand
lead to knowledge claims. Students in group 3 subjects are required to evaluate these
knowledge claims by exploring knowledge issues such as validity, reliability, credibility,
certainty,andindividualaswellasculturalperspectives.
The relationship between each subject and theory of knowledge (TOK) is of crucial
importanceandfundamentaltotheDiplomaProgramme.Havingfollowedacourseofstudy
ingroup3,studentsshouldbeabletoreflectcriticallyonthevariouswaysofknowingand
the methods used in human sciences, and in doing so, become the inquiring,
knowledgeableandcaringyoungpeopleoftheIBmissionstatement.
During the economics course a number of issues will arise that highlight the relationships
between TOK andeconomics.Someof thequestions that couldbe considered during the
courseareidentifiedwithinthesyllabus(seethesectionThefoundationsofeconomicsin
Approaches to the teaching of economics, as well as Syllabus). Teachers and their
studentsareencouragedtoexplorefurtherquestionsoftheirown.

Structure of the syllabus (extract)

Theory of knowledge (TOK) discussion points are included at the end of subsections.
Teachers and their students are encouraged to use these examples as part of their
explorationoftheinterrelationshipbetweenTOKandeconomics.

The foundations of economics (extract)

Thefollowinglistgivesexamplesoftheoryofknowledgediscussionpointsthatteachersmay
usewithstudentsaspartofthisunitofwork.Thelistisnotintendedtobeeitherprescriptive
orexhaustive.
Theoryofknowledge:potentialconnections
Whatdistinguishesasocialsciencefromanaturalscience?
Isthereasocialscientificmethodasopposedtoanaturalscientificmethod?What
mightbethesimilaritiesanddifferences?
Whataretherolesplayedbyabstractreasoningandconcreteevidenceinconstructing
economictheory?
Towhatextentiseconomicsvaluefree?
Areeconomictheoriesindependentofculture?
Isitpossibleforeconomiclawstochangeovertime?
Whatarethelimitationsoftheuseofdiagramsandchartsineconomics?
Whatistheroleofemotionandcreativityineconomics?
Whataretheimplicationsofeconomicsbeingbased,ultimately,onhumanpsychology?
Towhatextentshouldideasoffairnessandjusticeinformeconomicthinking?
Whatisamodelineconomics?Whatdoesitdo?Doesitmatterthatmanyofthemodels
weuseineconomicsdonotcorrespondwelltoreality?
Whataretheimplicationsoftheassumptionofceterisparibus?Dootherareasof
knowledgemakeasimilarassumption?
Howdowetestknowledgeclaimsineconomics?Shouldallknowledgeclaimsin
economicsbetestable?Ifaclaimisnottestable,isitmeaningless?
Isthereadifferentmethodofjustifyingqualitativeratherthanquantitativeknowledge
claims?Ifso,doesthisleadtooneorotherbeinginherentlymorereliable?
Whatcriteriashouldbeadoptedforevaluatingnormativestatementsineconomics?
Whatismeantbyrationalityineconomics?Aretheredifferenttypesofeconomic
rationality?
Ifeconomicsstudiesactualhumanbehaviour,shoulditalsostudyirrationalhuman
behaviour?

Syllabus content (extract)

Section 1: Microeconomics
Theoryofknowledge:potentialconnections
1.1Competitivemarkets:Demandandsupply
Towhatextentisittruetosaythatademandcurveisafictionalentity?
What assumptions underlie the law of demand? Are these assumptions likely to be true?
Doesitmatteriftheseassumptionsareactuallyfalse?
1.3Governmentintervention
Inwhatsensearewemorallyobligedtopaytaxes?Isthistheresultofapromisethatwe
have made ourselves? When was this promise made? (Make a distinction here between
moralandlegalobligations.)
Towhatextentisgovernmentmorallyobligedtoprovidehealthcareandwelfarebenefitsto
theunemployed?
1.4Marketfailure
Towhatextentistheobligationtoseeksustainablemodesofconsumptionamoralone?
What knowledge issues are involved in assessing the roleof technology in meetingfuture
patterns of consumption and decreasing the negative externalities of consumption
associatedwithfossilfuels?
What are the knowledge issues involved in determining what is a rational cost to pay for
haltingclimatechange?
How could we know if economically more developed countries are morally justified in
interfering in thedevelopmentofeconomically less developed countriesonthe groundsof
climatechange?
How can we know when climate change is sufficiently serious to warrant government
interferinginthefreedomofitscitizenstoconsume?
Howcanwecalculatetheexternalcostsofproducingandrunningitemssuchaslightbulbs
or motor vehicles? For example, low energy light bulbs consume less energy but they
requiremoreenergytoproduce,andsomebrandscontainmaterialsthatareharmfultothe
environmentsuchasmercury.Hybridcarsconsumelessenergytorunbutconsumemore
energytoproduce.
Whataretheproblemsinknowingwhetherclimatechangeisproducedbyhumanactivity?
1.5Theoryofthefirmandmarketstructures(HLonly)
Is it rational to take into account costs already incurred in deciding whether a business
ventureshouldbeterminatedorwhetheritshouldreceivemorefunds?

Howcanweknowhowtodeterminethebalanceofgovernmentpolicybetweenpromoting
competitionintheinterestoftheconsumerandallowingprofitabilityintheinterestoffirms?

Section 2: Macroeconomics
Theoryofknowledge:potentialconnections
2.1Thelevelofoveralleconomicactivity
Whatistheempiricalevidencefortheexistenceofthebusinesscycle?Howdowedecide
whetherthisevidenceissufficient?
2.2Aggregatedemandandaggregatesupply
BusinessconfidenceisacontributingfactortothelevelofAD.Whatknowledgeissuesarise
inattemptingtomeasurebusinessconfidence?
TheKeynesianandMonetaristpositionsdifferontheshapeoftheAScurve.Whatisneeded
to settle this question: empirical evidence (if so, what should be measured?), strength of
theoreticalargument,orfactorsexternaltoeconomicssuchaspoliticalconviction?
2.3Macroeconomicobjectives
Whatcriteriacanbeusedtoordermacroeconomicobjectivesintermsofpriority?Aresuch
criteriaexternaltoeconomics(thatis,normative)?
Iseconomicgrowthalwaysbeneficial?Whatcouldbemeantbythewordbeneficial?
Istherealwaysacosttoeconomicgrowth?
The notion of fairness can be approached from a number of perspectivesequality of
opportunity, maximizing the income of the least welloff group, and absolute equality of
income.Whichofthesenotionsseemstobemostattractive?Why?Examinewhateachof
theseperspectivessuggestsisafairdistributionofincome.
Equality of opportunity implies correcting for social advantage (for example, government
might devote more resources to the education of a child brought up in less prosperous
circumstances than one brought up in a comfortable home whose parents are university
lecturers). How far should the state go in making such corrections? Should all parents be
forced to read to their children so that no child should be at a disadvantage? Should the
stateattempttocorrectfortheunevendistributionofnaturalabilitiessuchasIQ(intelligence
quotient)bydevotingproportionallymoreresourcestochildrenoflessthanaverageIQ?
2.4Fiscalpolicy
Inonesensetheimpositionoftaxesbygovernmentonindividualsamountstoarestrictionof
individual freedom. How can we know when such government interference in individual
freedomisjustified?

2.6Supplysidepolicies
How can we know whether government should support pure research, which might
contributetothesumtotalofhumanknowledgebutwhichmightneverhaveanimpacton
technology?Whatotherknowledgeissuesarerelevanttoinvestmentinpureresearch?
Investment in education and training is a common supplyside policy.What other reasons
couldtherebeforsupportingtheeducationofthepopulation?Whatknowledgeissuesarise
in answering the question as to whether government should shoulder this responsibility or
whetheritshouldbelefttothemarket?

Section 3: International economics

Theoryofknowledge:potentialconnections
3.1Internationaltrade
Aretheremoralaswellaseconomicargumentsinfavouroffreetrade?
3.4Economicintegration
What criteria can be used to assess the benefits and the costs of increased economic
integration?
Mightincreasedeconomicintegrationeverbeconsideredundesirable?

Section 4: Development economics

Theoryofknowledge:potentialconnections
4.1Economicdevelopment
Whataretheknowledgeissuesinvolvedincompilingalistofdevelopmentgoals?
Doesthetermeconomicdevelopmentmeandifferentthingsindifferentcultures?
Aretheretwowaysofthinkingabouteconomics:fromthepointofviewofaneconomically
moredevelopedcountryorfromthatofaneconomicallylessdevelopedcountry?Ifso,what
is the difference? Are there two different sets of values in which such a distinction is
grounded?
How can wedecide if thedistinction betweeneconomically moredeveloped countriesand
economically less developed countries is a meaningful one given that economic
developmentitselfmightnotbesoclearlydefined?
4.2Measuringdevelopment
What criteria could we use to determine whether a particular method for measuring
developmentiseffective?
What knowledge issues might be encountered in constructing a composite indicator to
measuredevelopment?

4.7Theroleofinternationaldebt
For each factor, what would you consider to be sufficient evidence that it plays a role in
enhancingorinhibitingdevelopment?
4.8Thebalancebetweenmarketsandintervention
What criteria can economists use to decide on the balance between markets and
intervention?
Is development economics dependent upon external normative notions such as what
constitutesagoodorfulfilledlife?