What are the merits and demerits of Ceteris Paribus?

A ceteris paribus assumption is often fundamental to the predictive purpose of scientific inquiry. In order to formulate scientific laws, it is usually necessary to rule out factors which interfere with examining a specific causal relationship. Under scientific experiments, the ceteris paribus assumption is realized when a scientist controls for all of the independent variables other than the one under study, so that the effect of a single independent variable on the dependent variable can be isolated. By holding all the other relevant factors constant, a scientist is able to focus on the unique effects of a given factor in a complex causal situation.

Such assumptions are also relevant to the descriptive purpose of modeling a theory. In such circumstances, analysts such as physicists, economists, and behavioral psychologists apply simplifying assumptions in order to devise or explain an analytical framework that does not necessarily prove cause and effect but is still useful for describing fundamental concepts within a realm of inquiry.

In Economics this phrase is used quite often to assume all other factors to remain the same, while analysing the relationship between any two variables. This assumption eliminates the influence of other factors which may negativate the efforts to establish a scientific statement regarding the behaviour of economic variables. e.g. If we try to establish the relationship between demand and price, there may be other variables which may also influence demand besides price. The influence of the other factors may invalidate the hypotheses that quantity demanded of a commodity is inversely related to its price. If rise in price takes place along with an increase in income or a change in fashion, then the effect of price change may not be the same. A change in fashion may in fact raise the demand, despite the rise in price. Thus, we try to eliminate the disturbing influences of other variables by assuming them to remain constant.

Merits of ‘Ceteris Paribus’

  1. This assumption helps us in making predictions about the future.
  2. The assumption makes the analysis simple and easy.
  3. It is applicable to solution of practical problems in the real world.
  4. Such an assumption is very useful in analysis of behaviour of a firm or a consumer or a factor of production.
  5. It is easy to collect data when the field of inquiry is restricted by this assumption.

Demerits of ‘Ceteris Paribus’

  1. Ceteris Paribus neglects the interdependence between the forces and makes the analysis over-simplified.
  2. The assumption makes the analysis unrealistic. In the real world ‘Other things never remain constant.’ Everything is always changing.
  3. This assumption makes the principles and theories restrictive in nature. Therefore the analysis has limited applicability.
  4. The analysis is made static and less relevant to real world situation.
  5. Ceteris Paribus’ makes the explanation incomplete because it analyses the functional relation between a few selected variables and neglects others.

However, once we understand the functional relation and sequences between different variables and events with the ‘Ceteris Paribus’ we can gradually release the forces one by one and analyse more and more complicated realities. ‘Ceteris Paribus’ is therefore a tool for model building.

‘Ceteris Paribus’ is an assumption which we are compelled to make due to complexities in the real world. It is necessary for the sake of convenience. The limitations of human intelligence and capacity compel us to make this assumption. Moreover, without this assumption we cannot make a detailed study of economic events and economic relations and sequences.

Without ‘Ceteris Paribus’ condition we may not be able to isolate causal relationships between the variables that we intend to study and arrive at logical conclusions. However, in reality there are large number of variables interacting simultaneously at a given time. If our analysis has to be accurate we may have to examine two variables at a time which makes it inevitable to assume other variables to remain constant.

Moreover, as a social science we deal with human behavior which is subject to variations. At no cost we can expect people to behave in the same manner at all time. This does not imply any sort of irrationality on the part of people. Likewise assuming ceteris paribus condition does not reduce the validity of the theory. If any conclusion regarding human behaviour is drawn with ‘ceteris paribus’ condition it does not invalidate its practicality. In fact, even scientists take the help of ceteris paribus condition. e.g. when gravitational force is calculated, the scientist would make allowances for air and wind force to be at a constant rate. Thus ceteris-paribus is not peculiar to Economic analysis alone.

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