Economists adopt scientific methods in their investigations of economic problems and economic relationships. In this method, problems are identified and defined, information relevant to the problem are collected, organised and analysed, leading to the establishment of an economic theory.
Inductive and Deductive Methods:
1) Deductive Method:
The deductive method is also known as the abstract or analytical method. In this method, conclusions are derived from general truths, i.e. it proceeds from general to particular. The classical and neo-classical school of economists such as Ricardo, Mill, Malthus, Marshal, Pigou, etc. applied the deductive method in their economic investigations.
2) Inductive Method:
Inductive method which is also called empirical method was adopted by the historical school of economists. Its conclusions are derived from particular facts, i.e. it proceeds from particular to general. This method derives economic generalisations on the basis of experimentations, observations, and statistical methods.