REALISM AND ABSTRACTION IN ECONOMICS (william)
- Highlight on Page 4 | Added on Monday, March 12, 2012, 12:30 AM
from a Misesian point of view, when we find an empirical regularity we still need a correct theory to determine whether this regularity can be expected to hold over a broad or a narrow range of circumstances. For example, let’s say that in early 2001 I formulate a theory to the effect that there is a Constant Tolkienian Force in the universe that produces a Tolkien film every year. When Austrians complain that my theory ignores the fact that films are products of human action and not of constant impersonal forces, I reply: “Oh, I know that. My theory isn’t supposed to be realistic. The question is whether it’s a good predictor.” So I test it in 2001, 2002, and 2003. Lo and behold, my theory works each year!
