Classic Knits for Girl Dolls by Marjory Fainges

By Marjory Fainges

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Sample text

We have made the point that theories involve concepts which are not directly observable. The problem then arises as to how the theory can be used to explain things which are observable and, furthermore, predict events which have not yet occurred. The issue is one of relating the theory to the things that can be observed either directly or by experimentation. The phrase 'making the theory operational' is often used in this context. More formally, it is a problem of 'correspondence rules' which enable us to relate the theory to observational or experimental procedures.

A. L. 1 ;;;;, 122 per cent. L. at more than per cent but, as the equation shows, cannot be held at 1 less than 122 per cent. In fact, under the present arrangements, commercial banks must also maintain a minimum of balances at the Bank of England as a proportion of eligible liabilities of per cent. , and so forth. It is interesting to note in this respect that a behavioural equation may also incorporate an institutional element.

It is not at all clear how behaviour can be expressed by an equation. Keynes did say that, The amount that the community spends on consumption obviously depends (i) partly on the amount of its income, (ii) partly on the other objective attendant circumstances, and (iii) partly on the subjective needs and the psychological propensities and habits of the individuals composing it and the principles on which the income is divided between them The consumption function is now deeply entrenched in our theorising but how many specifications come near to expressing the behaviour outlined in the above quotation?

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