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Defence of Absurd Theories in Economics

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  • Nordberg, Morten

    ()
    (The Ragnar Frisch Centre for Economic Research)

  • Røgeberg, Ole Jørgen

    ()
    (The Ragnar Frisch Centre for Economic Research)

Abstract

Theories that involve plainly false and even bizarre assumptions are argued to have an important role in bundling empirical facts in a way that allows these to be understood, handled and used as modules in the construction of mechanisms by economists with human cognitive limits. Absurd theories are subcomponents used in a valid explanatory strategy as long as the mechanisms only derive the implications of the facts summarised. This provides a defence and explanation of many economic theories, but also imposes hard limits on such theorising.

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File URL: http://www.hero.uio.no/publicat/2003/HERO2003_18.pdf
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Bibliographic Info

Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2003:18.

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Length: 25 pages
Date of creation: 22 Jun 2009
Date of revision:
Handle: RePEc:hhs:oslohe:2003_018

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Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
Phone: 2307 5309
Fax: 2307 5310
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Web page: http://www.hero.uio.no/eng.html
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Keywords: As-if theory; Economic methodology; welfare economics;

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  1. Simon, Herbert A., 1978. "Rational Decision-Making in Business Organizations," Nobel Prize in Economics documents 1978-1, Nobel Prize Committee.
  2. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
  3. Hausman, Daniel M, 1989. "Economic Methodology in a Nutshell," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 115-27, Spring.
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  5. Sen, Amartya, 1993. "Internal Consistency of Choice," Econometrica, Econometric Society, vol. 61(3), pages 495-521, May.
  6. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  7. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-63, June.
  8. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  9. Machina, Mark J, 1999. "A Challenge to the "Econoclasts": A Commentary on "Rationality for Economists?"," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 107-08, December.
  10. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-36, December.
  11. Stanley, T D, 1985. "Positive Economics and Its Instrumental Defence," Economica, London School of Economics and Political Science, vol. 52(27), pages 305-19, August.
  12. Dawes, Robyn M., 1999. "A message from psychologists to economists: mere predictability doesn't matter like it should (without a good story appended to it)," Journal of Economic Behavior & Organization, Elsevier, vol. 39(1), pages 29-40, May.
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