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Operationalization in psychology refers to the process of defining real events or actions (reality) through the use of theory or multiple theoretical constructs. It is sometimes referred to as psychometrics, the study of aspects of life that are relatively intangible to measure. A good example of this is the concept of intelligence. You cannot simply come up to a person and measure intelligence, it is intangible. Rather, you measure aspects of it like problem solving, verbal ability, mathematical reasoning, spacial relations and comprehension. These aspects combined together in a theoretical way form the basis of I.Q. a measurement of a theoretical concept that has no real tangible existence.
An operational definition of a variable is when a study tells you precisely what the study's variables are and how you would define them. Basically, it is determining the exact definition of the variables you are researching. For example, let's say that you wanted to study the effects of stimulant use on testing performance. The first thing you would have to do as a researcher is to define the operational definitions of testing performance and what you mean by stimulants. Do you mean naturally occurring stimulants like caffeine or do you mean synthetically created ones like methamphetamine. You would also have to define testing performance and how that would be measured, what scale and to what extent.
Essentially, this process of operationalization allows researchers in psychology to define and specify that which is difficult to identify such as the abstract concepts of emotion, relationship and human satisfaction.