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Falsifiability

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  • 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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Bibliographic Info

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
Date of revision:
Handle: RePEc:pen:papers:08-016

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Keywords: Testing Strategic Experts;

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References

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  1. Ehud Lehrer & Eilon Solan, 2003. "No-Regret with Bounded Computational Capacity," Discussion Papers 1373, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Ehud Kalai, 1995. "Calibrated Forecasting and Merging," Discussion Papers 1144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Eddie Dekel & Yossi Feinberg, 2006. "Non-Bayesian Testing of a Stochastic Prediction," Discussion Papers 1418, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Alvaro Sandroni & Wojciech Olszewski, 2008. "Manipulability of Future-Independent Tests," PIER Working Paper Archive 08-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. Rustichini, Aldo, 1999. "Minimizing Regret: The General Case," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 224-243, October.
  6. Fudenberg, Drew & Levine, David, 1999. "An Easier Way to Calibrate," Scholarly Articles 3203773, Harvard University Department of Economics.
  7. 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.
  8. Nabil I. Al-Najjar & Jonathan Weinstein, 2008. "Comparative Testing of Experts," Econometrica, Econometric Society, vol. 76(3), pages 541-559, 05.
  9. LeRoy, Stephen F & Singell, Larry D, Jr, 1987. "Knight on Risk and Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 394-406, April.
  10. Sandroni, Alvaro & Olszewski, Wojciech, 2007. "Contracts and uncertainty," Theoretical Economics, Econometric Society, vol. 2(1), pages 1-13, March.
  11. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business.
  12. Sergiu Hart & Andreu Mas-Colell, 1999. "A general class of adaptative strategies," Economics Working Papers 373, Department of Economics and Business, Universitat Pompeu Fabra.
  13. 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.
  14. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December.
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Citations

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Cited by:
  1. Wojciech Olszewski & Alvaro Sandroni, 2006. "Strategic Manipulation of Empirical Tests," Discussion Papers 1425, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.

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