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…
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.
Previous studies about the effects of regulatory institutions on the outcomes of regulation have resulted in a lack of consensus on the nature of these impacts. This paper seeks to resolve some of this ambiguity by analyzing two dimension of electric utility regulatory outcomes, prices and reliability, with a…
Previous studies about the effects of regulatory institutions on the outcomes of regulation have resulted in a lack of consensus on the nature of these impacts. This paper seeks to resolve some of this ambiguity by analyzing two dimension of electric utility regulatory outcomes, prices and reliability, with a broader panel of explanatory variables and with a Hausman-Taylor regression technique. The results suggest that elected regulators and deregulated electricity markets result in worse reliability outcomes for consumers without strong evidence that either institution secures lower electricity prices. Incorporating these insights into a theoretical model of regulation could give more detailed insight into how to create regulatory institutions that can optimize the outcomes of governance.
