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The Methodology of Economics: How Economists Choose Between Theories

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I began this thesis because I was confused about economics. I wondered why there were so many different models. I didn't understand how they fit together. I was also confused by the assumptions being made. For instance, the assumption that

I began this thesis because I was confused about economics. I wondered why there were so many different models. I didn't understand how they fit together. I was also confused by the assumptions being made. For instance, the assumption that humans are rational utility-maximizers did not seem to agree with my own experiences. With my director Dr. Edward Schlee's help, my thesis has become an inquiry into the state of economic methodology, both in theory and in practice. The questions that drive this paper are: How do economists choose between theories? What is the purpose of economic theory? What is the role of empirical data in assessing models? What role do assumptions play in theory evaluation, and should assumptions make sense? Part I: Methodology is the theoretical portion of the paper. I summarize the essential arguments of the two main schools of thought in economic methodology, and argue for an updated methodology. In Part II: A case study: The expected utility hypothesis, I examine methodology in practice by assessing a handful of studies that seek to test the expected utility hypothesis. Interestingly, I find that there is a different between what economists say they are doing, and what they actually seem to be doing. Throughout this paper, I restrict my analysis to microeconomic theory, simply because this is the area with which I am more familiar. I intend this paper to be a guide for my fellow students and rising economists, as well as for already practicing economists. I hope it helps the reader better understand methodology and improve her own practice.

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2013-05

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Problem Class Dominance in Predictive Dilemmas

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One decision procedure dominates a given one if it performs well on the entire class of problems the given decision procedure performs well on, and then goes on to perform well on other problems that the given decision procedure does

One decision procedure dominates a given one if it performs well on the entire class of problems the given decision procedure performs well on, and then goes on to perform well on other problems that the given decision procedure does badly on. Performing well will be defined as generating higher expected utility before entering a problem. In this paper it will be argued that the timeless decision procedure dominates the causal
and evidential decision procedures. It will also be argued in turn that the updateless decision procedure dominates the timeless decision procedure. The difficulties of formalizing a modern variant of the ”smoking gene” problem will then be briefly examined.

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2014-05