Falsifiability

Sandroni, Alvaro; Olszewski, Wojciech

doi:10.2139/ssrn.1133128

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Falsifiability

PIER Working Paper No. 08-016

26 Pages Posted: 15 May 2008

See all articles by Alvaro Sandroni

Alvaro Sandroni

University of Pennsylvania - Department of Economics; Northwestern University - Kellogg School of Management

Wojciech Olszewski

Northwestern University - Department of Economics

Date Written: March 12, 2008

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.

Keywords: Testing Strategic Experts

JEL Classification: D81 and C11

Suggested Citation: Suggested Citation

Sandroni, Alvaro and Olszewski, Wojciech, Falsifiability (March 12, 2008). PIER Working Paper No. 08-016, Available at SSRN: https://ssrn.com/abstract=1133128 or http://dx.doi.org/10.2139/ssrn.1133128