Quote of the day: On theory and data

From Eric Crampton:

I tend to be pretty skeptical of results that aren’t grounded in basic price theory or that aren’t confirmed by a lot of different methods, including both Ocular and Ordinary Least Squares.

A single paper merely helps people to update their priors – it doesn’t provide conclusive evidence of a result.  Often when it comes to economic discourse there is too much “faith” put in single results that tend to reinforce whatever the authors prior is.

That is why the economic method in itself is a useful tool – but the process of reaching a conclusion, or justifying why a result holds, is one of debate and discussion.  It is more of an art form than anything else.

Unless you can say why a stated result means very little.  No matter how fancy your data analysis or theoretical model is, unless you can explain it it means nothing.  Luckily, economists out there do go around explaining why – which is why I have much more faith in the analysis of economists than many other disciplines.