' (also spelled ') (Classical ) is a Latin phrase, meaning "other things equal"; some other English translations of the phrase are "all other things being equal", "other things held constant", "all else unchanged", and "all else being equal". A statement about a causal, empirical, moral, or logical relation between two states of affairs is ceteris paribus if it is acknowledged that the statement, although usually accurate in expected conditions, can fail because of, or the relation can be abolished by, intervening factors.

A ceteris paribus assumption is often key to scientific inquiry, because scientists seek to eliminate factors that perturb a relation of interest. Likewise, in scientific modeling, simplifying assumptions permit illustration of concepts considered relevant to the inquiry. An example in economics is "If the price of milk falls, ceteris paribus, the quantity of milk demanded will rise." This means that, if other factors, such as deflation, pricing objectives, utility, and marketing methods, do not change, the decrease in the price of milk will lead to an increase in demand for it.

Economics

Some examples of ceteris paribus conditions commonly employed in economics include:

  • The number of consumers in the market
  • Consumer tastes or preferences
  • Prices of substitute goods
  • Consumer price expectations
  • Personal income

History in economics

Ceteris paribus has been relevant in economics for centuries, dating back to its first traces in 1295 by Peter Olivi. In the 16th century, Juan de Medina and Luis de Molina of the School of Salamanca first used “ceteris paribus” when discussing economic issues.

The earliest case of the Latin phrase being used in the English language publications was in the 17th century by William Petty, who used the clause to condition his labour theory of value. Economist John Stuart Mill’s use of the Latin phrase had significant influences as he characterised economy through how it managed troubling factors.

Economist Alfred Marshall had significant effects on the popularity for the ceteris paribus clause in the 19th century. It was his support to economics where he promoted partial equilibrium analysis, claiming that this analysis, and similar analysis’ hold due to the ceteris paribus clauses.

Two uses

The above passage by Marshall highlights two ways in which the ceteris paribus clause may be used: The one is hypothetical, in the sense that some factor is assumed fixed in order to analyse the influence of another factor in isolation. This would be hypothetical isolation. An example would be the hypothetical separation of the income effect and the substitution effect of a price change, which actually go together. The other use of the ceteris paribus clause is to see it as a means for obtaining an approximate solution. Here it would yield a substantive isolation.

  1. Law of supply and demand. The law of demand states that, when prices rise the demand of goods fall, whilst the law of supply dictates that as prices rise sellers are more willing to supply. When these laws interrelate market prices and supply in the market are determined. Ceteris paribus is used in the law of supply and demand through determining how independent variables will impact the casual factors of prices and supply in the market.

Ceteris Paribus is also inherently limited by what has been learned in complexity science about those situations which are highly affected by interconnections. Amid highly connected situations, a change to any one variable will change all others. In this way, when these complex connections are active, it is not possible in reality to hold all other values constant. Complex interconnected reality is not only common in physical and natural sciences but is of great influence in most socio-economic sciences.

See also

  • Apples and oranges
  • Confounding
  • List of Latin phrases
  • Mutatis mutandis
  • Occam's razor
  • Partial derivative

Notes

References

  • Whitaker J.K. (2008) "Ceteris Paribus", The New Palgrave Dictionary of Economics, Palgrave Macmillan, London.
  • Alfred Marshall (1920) Principles of Economics Vol. 1. 8th ed. London: Macmillan.
  • Wikidoc (2012) Ceteris Paribus Retrieved from Wikidoc:
  • Earle, P. (2020, July) [ https://www.aier.org/article/what-economists-can-teach-epidemiologists/ What Economists Can Teach Epidemiologists] @ American Institute for Economic Research
  • Vaidya, D. (n.d.) Ceteris Paribus @ WallStreetMojo:
  • Listen to Ceteris Paribus