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Falsifiability

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Author Info
Alvaro Sandroni () (Department of Economics, University of Pennsylvania)
Wojciech Olszewski () (Department of Economics, Northwestern University)
Abstract

We examine the fundamental concept of Popper’s falsifiability within an economic model in which a tester hires a potential expert to produce a theory. Payments are made contingent on the performance of the theory vis-a-vis future realizations of the data. We show that if experts are strategic, then falsifiability has no power to distinguish legitimate scientific theories from worthless theories. We also show that even if experts are strategic there are alternative criteria that can distinguish legitimate from worthless theories.

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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 08-016.

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Length: 26 pages
Date of creation: 12 Mar 2008
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Handle: RePEc:pen:papers:08-016

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Related research
Keywords: Testing Strategic Experts

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis

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  4. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February. [Downloadable!] (restricted)
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  9. Nabil I. Al-Najjar & Jonathan Weinstein, 2006. "Comparative Testing of Experts," Levine's Working Paper Archive 321307000000000590, UCLA Department of Economics. [Downloadable!]
  10. Vladimir Vovk & Glenn Shafer, 2005. "Good randomized sequential probability forecasting is always possible," Journal Of The Royal Statistical Society Series B, Royal Statistical Society, vol. 67(5), pages 747-763. [Downloadable!] (restricted)
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  13. Kalai, Ehud & Lehrer, Ehud & Smorodinsky, Rann, 1999. "Calibrated Forecasting and Merging," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 151-169, October. [Downloadable!] (restricted)
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