Ceteris paribus or caeteris paribus is a Latin phrase meaning "other things equal"; English translations of the phrase include "all other things being equal" or "other things held constant" or "all else unchanged"; A prediction or a statement about a causal, empirical, or logical relation between two states of affairs is ceteris paribus if it is acknowledged that the prediction, although usually accurate in expected conditions, can fail or the relation can be abolished by intervening factors.
Latin is a classical language belonging to the Italic branch of the Indo-European languages. The Latin alphabet is derived from the Etruscan and Greek alphabets and ultimately from the Phoenician alphabet.
In philosophical ontology, ontic is physical, real, or factual existence.
A ceteris paribus assumption is often key to scientific inquiry, as scientists seek to screen out factors that perturb a relation of interest. Thus, epidemiologists for example may seek to control independent variables as factors that may influence dependent variables—the outcomes or effects of interest. Likewise, in scientific modeling, simplifying assumptions permit illustration or elucidation of concepts thought relevant within the sphere of inquiry.
There is ongoing debate in the philosophy of science concerning ceteris paribus statements. On the logical empiricist view, fundamental physics tends to state universal laws, whereas other sciences, such as biology, psychology, and economics, tend to state laws that hold true in normal conditions but have exceptions, ceteris paribus laws (cp laws).The focus on universal laws is a criterion distinguishing fundamental physics as fundamental, whereas cp laws are predominant in most other sciences as special sciences, whose laws hold in special cases. This distinction assumes a logical empiricist view of science. It does not readily apply in a mechanistic understanding of scientific discovery. There is reasonable disagreement as to whether mechanisms or laws are the appropriate model, though mechanisms are the favored method.
Logical positivism and logical empiricism, which together formed neopositivism, was a movement in Western philosophy whose central thesis was verificationism, a theory of knowledge which asserted that only statements verifiable through empirical observation are meaningful. The movement flourished in the 1920s and 1930s in several European centers.
One of the disciplines in which ceteris paribus clauses are most widely used is economics, in which they are employed to simplify the formulation and description of economic outcomes. When using ceteris paribus in economics, one assumes that all other variables except those under immediate consideration are held constant. For example, it can be predicted that if the price of beef increases—ceteris paribus—the quantity of beef demanded by buyers will decrease. In this example, the clause is used to operationally describe everything surrounding the relationship between both the price and the quantity demanded of an ordinary good.
Economics is the social science that studies the production, distribution, and consumption of goods and services.
Beef is the culinary name for meat from cattle, particularly skeletal muscle. Humans have been eating beef since prehistoric times. Beef is a source of high-quality protein and nutrients.
An ordinary good is a microeconomic concept used in consumer theory. It is defined as a good which creates increased demand when the price for the good drops or conversely decreased demand if the price for the good increases, ceteris paribus. It is the opposite of a Giffen good.
This operational description intentionally ignores both known and unknown factors that may also influence the relationship between price and quantity demanded, and thus to assume ceteris paribus is to assume away any interference with the given example. Such factors that would be intentionally ignored include: a change in the price of substitute goods, (e.g., the price of pork or lamb); a change in the level of risk aversion among buyers (e.g., due to an increase in the fear of mad cow disease); and a change in the level of overall demand for a good regardless of its current price (e.g., a societal shift toward vegetarianism).
In economics and finance, risk aversion is the behavior of humans, who, when exposed to uncertainty, attempt to lower that uncertainty. It is the hesitation of a person to agree to a situation with an unknown payoff rather than another situation with a more predictable payoff but possibly lower expected payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value.
Vegetarianism is the practice of abstaining from the consumption of meat, and may also include abstention from by-products of animal slaughter.
The clause is often loosely translated as "holding all else constant." It does not imply that no other things will in fact change; rather, it isolates the effect of one particular change. Holding all other things constant is directly analogous to using a partial derivative in calculus rather than a total derivative, and to running a regression containing multiple variables rather than just one in order to isolate the individual effect of one of the variables.
The clause is used to consider the effect of some causes in isolation, by assuming that other influences are absent. Alfred Marshall expressed the use of the clause as follows:
The element of time is a chief cause of those difficulties in economic investigations which make it necessary for man with his limited powers to go step by step; breaking up a complex question, studying one bit at a time, and at last combining his partial solutions into a more or less complete solution of the whole riddle. In breaking it up, he segregates those disturbing causes, whose wanderings happen to be inconvenient, for the time in a pound called Ceteris Paribus. The study of some group of tendencies is isolated by the assumption other things being equal: the existence of other tendencies is not denied, but their disturbing effect is neglected for a time. The more the issue is thus narrowed, the more exactly can it be handled: but also the less closely does it correspond to real life. I.e. The more we apply the rule of ceteris paribus the further we distance ourselves from reality, e.g. If hydrocarbon fuels are infinite then society is sustainable.
Each exact and firm handling of a narrow issue, however, helps towards treating broader issues, in which that narrow issue is contained, more exactly than would otherwise have been possible. With each step more things can be let out of the pound; exact discussions can be made less abstract, realistic discussions can be made less inexact than was possible at an earlier stage.
The above passage by Marshall highlights two ways in which the ceteris paribus clause may be used: The one is hypothetical, in the sense that some factor is assumed fixed in order to analyse the influence of another factor in isolation. This would be hypothetical isolation. An example would be the hypothetical separation of the income effect and the substitution effect of a price change, which actually go together. The other use of the ceteris paribus clause is to see it as a means for obtaining an approximate solution. Here it would yield a substantive isolation.
Substantive isolation has two aspects: temporal and causal. Temporal isolation requires the factors fixed under the ceteris paribus clause to actually move so slowly relative to the other influence that they can be taken as practically constant at any point in time. So, if vegetarianism spreads very slowly, inducing a slow decline in the demand for beef, and the market for beef clears comparatively quickly, we can determine the price of beef at any instant by the intersection of supply and demand, and the changing demand for beef will account for the price changes over time (Temporary Equilibrium Method).
The other aspect of substantive isolation is causal isolation: those factors frozen under a ceteris paribus clause should not significantly be affected by the processes under study. If a change in government policies induces changes in consumers' behaviour on the same time scale, the assumption that consumer behaviour remains unchanged while policy changes is inadmissible as a substantive isolation (Lucas critique).
Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an economic equilibrium for price and quantity transacted.
Causality is efficacy, by which one process or state, a cause, contributes to the production of another process or state, an effect, where the cause is partly responsible for the effect, and the effect is partly dependent on the cause. In general, a process has many causes, which are also said to be causal factors for it, and all lie in its past. An effect can in turn be a cause of, or causal factor for, many other effects, which all lie in its future. Multiple philosophers have believed that causality is metaphysically prior to notions of time and space.
In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency in models involving uncertainty. To obtain consistency within a model, the predictions of future values of economically relevant variables from the model are assumed to be the same as that of the decision-makers in the model, given their information set, the nature of the random processes involved, and model structure. The rational expectations assumption is used especially in many contemporary macroeconomic models.
In economics, elasticity is the measurement of the proportional change of an economic variable in response to a change in another. It shows how easy it is for the supplier and consumer to change their behavior and substitute another good, the strength of an incentive over choices per the relative opportunity cost.
In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in the price of another good, ceteris paribus. It is measured as the percentage change in quantity demanded for the first good that occurs in response to a percentage change in price of the second good. For example, if, in response to a 10% increase in the price of fuel, the demand for new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be:cross body . A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products. Assume products A and B are complements, meaning that an increase in the price of B leads to a decrease in the quantity demanded for A. Equivalently, if the price of product B decreases, the demand curve for product A shifts to the right reflecting an increase in A's demand, resulting in a negative value for the cross elasticity of demand. The exact opposite reasoning holds for substitutes.
A counterfactual conditional, is a conditional with a false if-clause. The term "counterfactual conditional" was coined by Nelson Goodman in 1947, extending Roderick Chisholm's (1946) notion of a "contrary-to-fact conditional". The study of counterfactual speculation has increasingly engaged the interest of scholars in a wide range of domains such as philosophy, human geography, psychology, cognitive psychology, history, political science, economics, social psychology, law, organizational theory, marketing, and epidemiology.
Mutatis mutandis is a Medieval Latin phrase meaning "having changed what needs to be changed" or "once the necessary changes have been made". It remains unnaturalized in English and is therefore usually italicized in writing. It is used in many countries to acknowledge that a comparison being made requires certain obvious alterations, which are left unstated. It is not to be confused with the similar ceteris paribus, which excludes any changes other than those explicitly mentioned. Mutatis mutandis is still used in law, economics, mathematics, linguistics and philosophy. In particular, in logic, it is encountered when discussing counterfactuals, as a shorthand for all the initial and derived changes which have been previously discussed.
In economics, diminishing returns is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.
In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at any given price. It is a graphic representation of a market demand schedule. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together, assuming independent decision-making.
The Stolper–Samuelson theorem is a basic theorem in Heckscher–Ohlin trade theory. It describes the relationship between relative prices of output and relative factor rewards—specifically, real wages and real returns to capital.
Anomalous monism is a philosophical thesis about the mind–body relationship. It was first proposed by Donald Davidson in his 1970 paper "Mental Events". The theory is twofold and states that mental events are identical with physical events, and that the mental is anomalous, i.e. under their mental descriptions, relationships between these mental events are not describable by strict physical laws. Hence, Davidson proposes an identity theory of mind without the reductive bridge laws associated with the type-identity theory. Since the publication of his paper, Davidson has refined his thesis and both critics and supporters of anomalous monism have come up with their own characterizations of the thesis, many of which appear to differ from Davidson's.
Partial equilibrium is a condition of economic equilibrium which takes into consideration only a part of the market, ceteris paribus, to attain equilibrium.
Demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.
In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or directly to another agent in the marketplace. Supply can be in currency, time, raw materials, or any other scarce or valuable object that can be provided to another agent. This is often fairly abstract. For example in the case of time, supply is not transferred to one agent from another, but one agent may offer some other resource in exchange for the first spending time doing something. Supply is often plotted graphically with the quantity provided plotted horizontally and the price plotted vertically.
In philosophy of science, a causal model is a conceptual model that describes the causal mechanisms of a system. Causal models can improve study designs by providing clear rules for deciding which independent variables need to be included/controlled for.
An aggregate in economics is a summary measure describing a market or economy. The aggregation problem is the difficult problem of finding a valid way to treat an empirical or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent as described in general microeconomic theory. Examples of aggregates in micro- and macroeconomics relative to less aggregated counterparts are:
Monetary inflation is a sustained increase in the money supply of a country. Depending on many factors, especially public expectations, the fundamental state and development of the economy, and the transmission mechanism, it is likely to result in price inflation, which is usually just called "inflation", which is a rise in the general level of prices of goods and services.
Advertising elasticity of demand is an elasticity measuring the effect of an increase or decrease in advertising on a market. Although traditionally considered as being positively related, demand for the good that is subject of the advertising campaign can be inversely related to the amount spent if the advertising is negative.
Causal research, also called explanatory research, is the investigation of cause-and-effect relationships. To determine causality, it is important to observe variation in the variable assumed to cause the change in the other variable(s), and then measure the changes in the other variable(s). Other confounding influences must be controlled for so they don't distort the results, either by holding them constant in the experimental creation of data, or by using statistical methods. This type of research is very complex and the researcher can never be completely certain that there are no other factors influencing the causal relationship, especially when dealing with people’s attitudes and motivations. There are often much deeper psychological considerations that even the respondent may not be aware of.
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