# Using Data and Models in Economics

Economists use data to create models of the world. Through these objects, they try to understand the choices people make regarding money.

The scientific method is the name for the ongoing process that economists and other scientists use to develop models of the world. Empirical evidence is facts that are obtained through observations and measurement. This is also called data. Economists try to uncover causal relationships among variables. An experiment can be designed to measure a causal relationship. Economists now actively pursue experiments both in the laboratory and in the field. Economists also determine causality by studying historical data that have been generated by a natural experiment.

A model is a simplified description of reality. Sometimes economists will refer to a model as a theory. These terms are usually used interchangeably. Empirical evidence consists of facts that are obtained through observation and measurement. It is also called data.

The median value is calculated by ordering the numbers from least to greatest and then finding the value halfway through the list. The mean is the sum of all the different values divided by the number of different values. Causation occurs when one thing directly affects another. A variable is a changing factor.

Correlation means that two variables tend to change at the same time. Positive correlation implies that two variables tend to move in the same direction. Negative correlation implies that two variables tend to move in opposite directions. When two variables have movements that are not related, we say that the variables have zero correlation. An omitted variable is something that has been left out of a study that would explain why two variables that are in the study are correlated. Reverse causality occurs when we mix up the direction of cause and effect.

An experiment is a controlled method for investigating causal relationships among variables. Randomization is the assignment of subjects by chance, rather than by choice, to a control group. A natural experiment is an empirical study in which some process has assigned subjects to control and treatment groups in a random or nearly random way.