A bit on methodology.
by Andreas Baumann
Let me start by telling you something you (probably) didn’t learn in science class; the reluctance to adopt the heliocentric model did not stem from religious convictions, but from the fact that for a lot of years, the geocentric models provided better fit for the observations. One of the main arguments for adopting the heliocentric model was not empirical, but theoretical: it was not credible that Nature should have been created with the tardiness of the epicycles. The heliocentric model was much more simple and beautiful. Of course, this preference for beautiful models led to reluctance to replace the perfect circles with the more mundane ellipse.
This conflict between theoretically beautiful and empirically functional models is everywhere in economics and social science. In economics, the two eminent economists Ronald Coase (of eponymous theorem fame) and Milton Friedman argued opposite positions.
Friedman proposed a “black-box” view of scientific models in the article “The Methodology of Positive Economics” (1953), wherein not only one, but the only criteria for economic models is their ability to predict future data. This led him to view assumptions – the building stones of theories – not as statements of statements about the real world, but as “symbols”, wherein one could compress as much information as desired to make the theorems one intended to state stand out as particularly beautiful, as evidenced in this quote:
Truly important and significant hypotheses will be found to have “assumptions” that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense)
Coase (in the article “How should economists choose?”) argued that theories are not merely black boxes to produce predictions; they should also inform our understanding of the real world, We evaluate our beliefs about the world through the validation of complex theories, and this may lead us to accept or reject certain assumptions.
I’ve noticed a thing about presenting papers; when you present a paper to a gathering of economists, they’re keen on adressing endogeneity issues, functional form etc. However, when you present a paper to a gathering of sociologists, they typically attack the theoretical foundations of your work: are your models of how actors make decisions theoretically well-founded? Maybe the sociologists are the ones who really have taken Coase’s advice to economists to heart.