A defence of absurd theories in economics

Authors:

Nordberg, Morten and Ole Røgeberg

Year:

2005

Reference:

Vol 12, no 4, pp 543-62

Summary

Theories that involve plainly false and even bizarre assumptions are argued to have an important role in bundling empirical facts in a way that allows these to be understood, handled and used as modules in the construction of mechanisms by economists with human cognitive limits. Absurd theories are subcomponents used in a valid explanatory strategy as long as the mechanisms only derive the implications of the facts summarised. This provides a defence and explanation of many economic theories, but also imposes hard limits on such theorising.

JEL:

B41, D00

Keywords:

As-if theory, economic methodology, welfare economics

Project:

Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 4101 - Economics of health

Contact:

morten.nordberg@frisch.uio.no

Financing:

The Research Council of Norway