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Falsifiability

  • Alvaro Sandroni

    ()

    (Department of Economics, University of Pennsylvania)

  • Wojciech Olszewski

    ()

    (Department of Economics, Northwestern University)

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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File URL: http://economics.sas.upenn.edu/system/files/working-papers/08-016.pdf
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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
Date of revision:
Handle: RePEc:pen:papers:08-016
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  1. Ehud Kalai & Ehud Lehrer & Rann Smorodinsky, 2010. "Calibrated Forecasting and Merging," Levine's Working Paper Archive 584, David K. Levine.
  2. Hart, Sergiu & Mas-Colell, Andreu, 2001. "A General Class of Adaptive Strategies," Journal of Economic Theory, Elsevier, vol. 98(1), pages 26-54, May.
  3. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December.
  4. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.
  5. 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.
  6. 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.
  7. 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.
  8. Nabil I. Al-Najjar & Jonathan Weinstein, 2008. "Comparative Testing of Experts," Econometrica, Econometric Society, vol. 76(3), pages 541-559, 05.
  9. 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.
  10. Drew Fudenberg & David K. Levine, 1996. "An Easier Way to Calibrate," Levine's Working Paper Archive 2059, David K. Levine.
  11. 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.
  12. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business.
  13. Sandroni, Alvaro & Olszewski, Wojciech, 2007. "Contracts and uncertainty," Theoretical Economics, Econometric Society, vol. 2(1), pages 1-13, March.
  14. Rustichini, Aldo, 1999. "Minimizing Regret: The General Case," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 224-243, October.
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