When does an economic theory become true?
When does it satisfy requirements for true knowledge, e.g. similar to those in empirical sciences?
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$\begingroup$ Hi: It's an interesting question but I don't think it's possible. All one can do is test the theory econometrically-statistically and make a conclusion based on the results of the test. economics and the empirical sciences are quite different in that respect. $\endgroup$– mark leedsAug 16, 2018 at 14:03
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1$\begingroup$ What exactly are the requirements for true knowledge? Philosophers have been debating for centuries without an agreement on what constitutes knowledge per se, let alone the true vs. false versions of it, or if there could ever be false knowledge as such. $\endgroup$– Herr K.Aug 16, 2018 at 16:24
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$\begingroup$ @HerrK. Well at least there are some models that work better than some others. So I would say, just use the one that is most meaningful at the moment or in the given context. $\endgroup$– mavaviljAug 16, 2018 at 16:30
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$\begingroup$ im kind of with Herr K. here. there are issues of truth even in the "Hard" sciences. $\endgroup$– EconJohn ♦Aug 16, 2018 at 18:33
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$\begingroup$ @EconJohn It doesn't stop them from being productive. So even if it's "incomplete", it's still useful. $\endgroup$– mavaviljAug 16, 2018 at 18:44
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2 Answers
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It's just the same as in the physical sciences:
an economic theory, like any theory or model in physics or chemistry or biology, is wrong (H/T George Box), but it can be useful.
"True knowledge" is not a really a useful concept; not in physical sciences, not in social sciences. The important question is whether a model gives us useful insights, and whether it can constructively inform decisions.
An economic theory gains acceptance when it turns out to be useful.
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$\begingroup$ I would question the final statement though. An economic theory may well gain acceptance also because it benefits some group. E.g. communist theories for workers, the opposite for wealthy people. That is then not an objective or neutral theory. $\endgroup$– mavaviljAug 17, 2018 at 7:46
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When - just as in physics of any other science - testable predictions fit observed data. It's "true knowledge", and neither is any theory in any science, but rather, empirically observed behavior that matches what the framework/theory predicts. That's a good benchmark for good theory.
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$\begingroup$ I would agree that ideally yes, however the reason for positing the question was that I'm unsure as to how often economic truths actually are very well-tested. Yet they may be used to draw political conclusions. $\endgroup$– mavaviljAug 17, 2018 at 7:08