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The Domain Of Theories And Tests By The Realism Of Assumptions

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  • Thomas Mayer

    (Department of Economics, University of California Davis)

Abstract

The principle that theories should be tested by the accuracy of their predictions but not by the realism of their assumptions needs to be qualified. As a practical matter we often need to evaluate the applicability of theories to cases for which they have not been tested by their predictions. Here we rely on the fact that theories are applicable only within a specific domain. In determining whether a specific case, for which no direct tests are available is within the theory''s domain, we look primarily at whether the assumptions of the theory are as applicable to it as they are to the cases for which the theory has been successfully tested.

Suggested Citation

  • Thomas Mayer, 2003. "The Domain Of Theories And Tests By The Realism Of Assumptions," Working Papers 312, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:312
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    File URL: https://repec.dss.ucdavis.edu/files/1gRhueCFk8tce15LqjzB4p77/98-11.pdf
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    References listed on IDEAS

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    1. Thomas Russell, 1997. "The rationality hypothesis in economics: from Wall Street to Main Street," Journal of Economic Methodology, Taylor & Francis Journals, vol. 4(1), pages 83-100.
    2. repec:cdl:ucsbec:13-89 is not listed on IDEAS
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    5. Becker, Gary S, 1993. "Nobel Lecture: The Economic Way of Looking at Behavior," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 385-409, June.
    6. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    7. Becker, Gary S & Landes, Elisabeth M & Michael, Robert T, 1977. "An Economic Analysis of Marital Instability," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1141-1187, December.
    8. LeRoy, Stephen F, 1989. "Efficient Capital Markets and Martingales," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1583-1621, December.
    9. Robert Goldfarb, 1995. "The economist-as-audience needs a methodology of plausible inference," Journal of Economic Methodology, Taylor & Francis Journals, vol. 2(2), pages 201-222.
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    Cited by:

    1. Frank Hindriks, 2005. "Unobservability, tractability and the battle of assumptions," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(3), pages 383-406.

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