26 Pages Posted: 15 May 2008
Date Written: March 12, 2008
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