Economics, 3rd Edition

Inductive and Deductive Reasoning 

Inductive reasoning refers to the process of observation from 

which patterns might be formed which provides evidence for a hypothesis which may lead to a theory. In 

contrast, deductive reasoning begins with a theory from which a hypothesis is drawn. The hypothesis is 

then subject to observation and either confirmation or rejection. One is not any better than the other – they 

are different ways of approaching research and may be closely linked. What is important is that we always 

treat any research with a degree of critical awareness – we don’t just simply accept the conclusions drawn 

from the research but question them and subject them to further testing. Through this circular process, 

refinements and improvements to theories and explanations can be developed which in turn allow us to 

make more informed decisions.

A classic example of the relationship between inductive and deductive reasoning can be seen in 

the case of observing swans. The researcher observes a river with swans swimming past. Every swan 

observed is white. At the end of the observation period the researcher draws a conclusion that ‘all swans 

are white’. The evidence gathered does support the hypothesis that ‘all swans are white’. A theory about 

why swans are always white might be developed to explain this phenomenon. Subsequent testing of the 

hypothesis might confirm that, based on the evidence, all swans are white and this might be the accepted 

hypothesis for many years until, one day, someone sees a black swan. At which point the hypothesis is 

rejected and the theory will have to be modified. This may lead the researcher to begin asking questions 

about why the majority of swans appear to be white and what reasons there might be for some swans 

being black which can again be the subject of empirical research.