Falsifiability

Wojciech Olszewski*, Alvaro Sandroni

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

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-à-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.

Original languageEnglish (US)
Pages (from-to)788-818
Number of pages31
JournalAmerican Economic Review
Volume101
Issue number2
DOIs
StatePublished - Apr 2011

ASJC Scopus subject areas

  • Economics and Econometrics

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