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Falsifiability

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  • Wojciech Olszewski
  • Alvaro Sandroni

Abstract

We examine Popper's falsifiability within an economic model in which a tester hires a potential expert to produce a theory. Payments are contingent on the performance of the theory vis-a-vis data. We show that if experts are strategic, falsifiability has no power to distinguish scientific theories from worthless theories. The failure of falsification in screening informed and uninformed experts motivates questions on the broader concepts of refutation and verification. We demonstrate an asymmetry between the two concepts. Like falsification, verification contracts have no power to distinguish between informed and uninformed experts, but some refutation contracts are capable of screening experts. (JEL B41)

Suggested Citation

  • Wojciech Olszewski & Alvaro Sandroni, 2011. "Falsifiability," American Economic Review, American Economic Association, vol. 101(2), pages 788-818, April.
    • Handle: RePEc:aea:aecrev:v:101:y:2011:i:2:p:788-818
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.2.788
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    References listed on IDEAS

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    Cited by:

    1. Olszewski, Wojciech, 2015. "Calibration and Expert Testing," Handbook of Game Theory with Economic Applications,, Elsevier.
    2. Al-Najjar, Nabil & Sandroni, Alvaro, 2013. "A difficulty in the testing of strategic experts," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 5-9.
    3. Felgenhauer, Mike, 2021. "Experimentation and manipulation with preregistration," Games and Economic Behavior, Elsevier, vol. 130(C), pages 400-408.
    4. Boleslavsky, Raphael & Lewis, Tracy R., 2016. "Evolving influence: Mitigating extreme conflicts of interest in advisory relationships," Games and Economic Behavior, Elsevier, vol. 98(C), pages 110-134.

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    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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