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There are influential ‘theories’ that are in plain contrast to experimental evidence, including the capital asset pricing model, the efficient market hypothesis, or the Markowitz portfolio theory. These concepts earned their inventors Nobel Prizes.

Why economics does not believe in data/empirical evidence ?

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    $\begingroup$ That's bold claim. Your examples are all related to finance, of which I know little. It would be helpful if you can be more specific about how those theories are "in plain contrast to experimental evidence." $\endgroup$
    – Herr K.
    Commented Dec 20, 2023 at 17:50
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    $\begingroup$ As for other areas of economics, your claim is more likely false than true. I'd venture to say that over 90% of the papers published by economists nowadays have an empirical component in them. It is therefore hard to argue that economics as a discipline "does not believe in data/empirical evidence". $\endgroup$
    – Herr K.
    Commented Dec 20, 2023 at 17:50
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    $\begingroup$ Experimental evidence??? $\endgroup$
    – Michael Greinecker
    Commented Dec 20, 2023 at 23:46

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Why economics does not believe in data/empirical evidence?

First, economics is a name of a scientific subject, as such it cannot have any beliefs. Economists can have beliefs because economists are people but economics is just name for a subject. A subject could be considered theoretical if most work published in the area is theoretical, but subject cannot believe in anything, that's like talking about believes a house or boat holds.

Second, vast majority of economists do believe in empirical evidence, and most publish research in economics is empirical.

Research by Angrist et al (2017) clearly shows that most economic research that is now published is empirical research (see figure below). Moreover, the number of Nobel Prizes awarded for some empirical work in economics increases significantly over time as a proportion of total prizes.

This clearly shows that:

  • Economics is nowadays predominantly empirical subject as clearly shown by data.
  • Majority of economists believe, work and approve empirical research for publication.
  • Top elite economists (who go on winning Nobel Prizes) are focusing more and more time on empirical work.

As such the claim in the post is simply not factually true. Economists do believe in empirical research and economics is empirical subject.

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There are influential ‘theories’ that are in plain contrast to experimental evidence, including the capital asset pricing model, the efficient market hypothesis, or the Markowitz portfolio theory. These concepts earned their inventors Nobel Prizes.

This in no way indicates that economists do not believe in empirical data.

For example, you claim that "There are influential ‘theories’ that are in plain contrast to experimental evidence, including the efficient market hypothesis".

  • First this claim is clearly false. Although, one can reject efficient market hypothesis using some clever econometrics, it is actually extremely difficult to do so and that is precisely because data actually look like they support the efficient market hypothesis. If you look at stock returns they appear to be completely random and one has to have a lot of data and sophisticated methods to find temporary non-random patterns (e.g. see Malkiel 2003).

  • Second, just because model can be falsified does not mean it is not useful. Newtonian physics was already falsified long time ago, yet still physics students have to learn it and many engineers apply it as an approximation instead of working with relativity.

    Relativity is also incomplete theory, which cannot explain empirical observations on small scales, yet Albert Einstein won Nobel Prize for it. Nobel Prizes are awards for intellectual achievements not for arriving at final truth.

    Some theories can be more correct and some less correct but no theory can ever be 100% correct. In science, whether in economics, physics, biology etc, we routinely provisionally accept and celebrate theories even if we know for a fact that they are not correct, if they are more correct than other theories, or if they have broader explanatory power than theories that are just tailored to some very specific and narrow case but can't be applied more broadly.

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  • $\begingroup$ Thanks for the answer just one more question is economics more sort of deductive reasoning or inductive reasoning ? $\endgroup$
    – quanity
    Commented Dec 20, 2023 at 18:27
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    $\begingroup$ @quanity You keep asking if economics is this or that as if you imply that economics is inherently either inductive or deductive, answer is neither. Economics is the science that studies the relationship between scarce resources with alternative uses and various human goals/needs. The practice of economics is neither inductive or deductive per se. In the past (I am talking pre mid-20th century) economics relayed predominantly on deduction because it was impossible to apply induction due to lack of data collection which was primarily due to technological constraint. As technology $\endgroup$
    – 1muflon1 ♦
    Commented Dec 20, 2023 at 21:58
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    $\begingroup$ allowed for collection of econ data, share of papers that use empirical or if you want inductive approach steadily increased and at a present empirical research clearly dominates the field. However, economics is not intrinsically inductive or deductive, if future scientists discover they have more need for theoretical research the shares might adjust more toward balance or predominance of theory. This is hard to predict precisely because no scientific field can inherently be inductive or deductive, to do science you both need empirical analysis and theory since empirics without theory $\endgroup$
    – 1muflon1 ♦
    Commented Dec 20, 2023 at 22:00
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    $\begingroup$ is just data mining and theory without empirics is just collection of self consistent postulates. Science always needs both to progress but share of each at each points of time may change depending on what problems and constraints scientists face (e.g. technological constraints as with economics prior to modern era). $\endgroup$
    – 1muflon1 ♦
    Commented Dec 20, 2023 at 22:09

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