Ceteris Paribus is a Latin expression which means all other things remaining constant. It is an essential component of a scientific method. If, for example, we wish to examine the effect of price on demand we do not simultaneously change other factors or variables like incomes, tastes, etc.
Therefore, when formulating economic principles it is important to measure (determine) the effect of change in one variable while holding other variables constant – care is taken to always state that such and such will happen, ceteris paribus.
However, this principle presents particular problems in the social science (economics) because, whereas in the natural sciences laboratory experiments can be undertaken, it is not possible with human society (human behavior, etc). It can therefore be argued that since economics is concerned with human behavior, it is impossible to reach any firm conclusions. This may be so if we consider the behavior of one person since human beings are largely unpredictable and may react in different ways to the same stimulus. Moreover, while individuals are unpredictable, people in large numbers are not. If for example, there is an increase in income it is possible that any particular individual may or may not spend more. But if we examine what happens to a million people as their income increases it is possible to conclude that, overall, their expenditure (demand) will increase. Thus, examining a large number of
people’s behavior allows economists to take advantage of the law of large numbers, which predicts that the random behavior of one person in a large group will be offset by the random behavior of another, so that it is possible to make definite predictions about the behavior of the group as a whole. Ceteris paribus
is assumed due to the complexity of the world setup and the existence of numerous factors that influence economic behavior of people which is the subject matter of economists. Natural scientists can control or hold other things constant during laboratory experiments which economists cannot do since it is
particularly impossible to make human behavior stationary (static) or completely manipulate (that is, human behavior sometimes simultaneously and constantly changes). In price mechanism, for instance, several factors are functions of others. Thus economists always assume all other things remain constant
while studying and analysing the impact of a particular variable. For example, the statement that supply is an increasing function of price ceteris paribus implies that supply is affected by factors other than price only that such factors have been held constant in order to clearly analyse the effect of change in price on supply.
Meaning of “Ceteris Paribus” as used in economics
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