AbstractWe 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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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 08-016.
Length: 26 pages
Date of creation: 12 Mar 2008
Date of revision:
Testing Strategic Experts;
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 and Methodology: General - - - Bayesian Analysis: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-24 (All new papers)
- NEP-CTA-2008-05-24 (Contract Theory & Applications)
- NEP-HPE-2008-05-24 (History & Philosophy of Economics)
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