What is 'Mathematical Economics'
Mathematical economics is a model of economics that utilizes math principles and methods to create economic theories and to investigate economic quandaries. Mathematics permits economists to conduct quantifiable tests and create models to predict future economic activity.
Advancements in computing power, big data techniques and other advanced mathematics applications have played a large part in making quantitative methods a standard element of economics. These elements are all backed by scientific methods advancing the study of economics.
The marriage of statistical methods, mathematics and economic principles has created an entirely new branch of economics called econometrics.
BREAKING DOWN 'Mathematical Economics'
Mathematical economics relies on statistical observations to prove, disprove and predict economic behavior. Although the discipline is heavily influenced by the bias of the researcher, mathematics allows economists to explain observable phenomenon and provides the backbone for theoretical interpretation.
Economists often wrestle with competing models capable of explaining the same recurring relationship called an empirical regularity, but few models provide definitive clues to the size of the association between central economic variables. From Main Street to Wall Street to Washington, this is what matters most to policymakers. When setting monetary policy, for example, central bankers want to know the likely impact of changes in official interest rates on inflation and the growth rate of the economy. It is in cases like this that economists turn to econometrics.
Using Econometrics
By turning to econometrics, the mixture of economic theory, mathematics and statistical inference can quantify valuable economic phenomena. In other words, it turns theoretical economic models into useful tools for everyday economic policymaking. The objective of econometrics is to convert qualitative statements (such as “the relationship between two or more variables is positive”) into quantitative statements (such as “consumption expenditure increases by 95 cents for every one dollar increase in disposable income”).
As we're flooded with ever more information, it's something of an understatement to say the blending of qualitative and quantitative methods are a substantial improvement on traditional economic techniques. As Stock and Watson (2007) put it, “econometric methods are used in many branches of economics, including finance, labor economics, macroeconomics, microeconomics and economic policy.” Economic policy decisions are rarely made without econometric analysis to assess their impact.

Econometrics
Econometrics is the application of statistical and mathematical ... 
Lawrence Klein
Lawrence Klein was an American economist and winner of the 198 ... 
Ragnar Frisch
A Norwegian economist and joint winner in 1969 of the very first ... 
Applied Economics
Applied economics refers to the use of economyframed theories, ... 
Positive Economics
Positive economics is the study of economics based on objective ... 
Economic Conditions
Economic conditions are the state of the economy in a country ...

Insights
Economics Basics
Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more! 
Financial Advisor
How Do Companies Forecast Oil Prices?
Read about the different forecasting methods that businesses use to predict future crude oil prices, and why it's so difficult to guess correctly. 
Insights
Is Infinite Economic Growth on a Finite Planet Possible?
While the finite nature of Earth's resources limits the direction of economic growth, it does not mean that infinite economic growth is impossible. 
Investing
The Difference Between Finance And Economics
Finance and economics are often taught as separate subjects, but they are interrelated disciplines that influence one another in many ways. 
Personal Finance
Quantitative Analyst: Job Description & Average Salary
Learn the different job duties of a quantitative analyst and how much money an analyst makes; understand the skills needed to be successful at this career. 
Investing
Business Cycle
The business cycle refers to the fluctuations in economic activity that an economy experiences over a period of time. It consists of expansions, or periods of economic growth, and contractions, ... 
Investing
Calculating Economic Profit
Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs. 
Investing
Mathematical Trader Explains Top Currency Trade
A partner at mathematical trading shop Bell Curve Trading, Strazzulo and his team model the markets using mathematical formulas.

What impact does economics have on government policy?
Learn about the impact of economic conditions on government policy and understand how governments engineer economic conditions ... Read Answer >> 
What is the difference between accounting and economics?
Discover the difference between accounting and economics by comparing and contrasting the financial discipline of accounting ... Read Answer >> 
Are perfect competition models in economics useful?
Take a look at some of the arguments made by the proponents and critics of the theory of perfect competition in contemporary ... Read Answer >> 
How are labor demand forecasts made in human resources planning?
Discover how human resource planning might be used to estimate the correct demand for labor in a given market, both qualitatively ... Read Answer >> 
What is the difference between financial capital and economic capital?
Read about the differences between types of financial capital, which companies use to raise money, and economic capital models ... Read Answer >> 
How do economists measure positive and negative externalities?
Learn the definition of positive and negative externalities and which methods economists use to measure externalities in ... Read Answer >>