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The Foundations of Positive and Normative EconomicsA Hand Book$
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Andrew Caplin and Andrew Schotter

Print publication date: 2008

Print ISBN-13: 9780195328318

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195328318.001.0001

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What's so Informative about Choice?

What's so Informative about Choice?

Chapter:
(p.70) Chapter 3 What's so Informative about Choice?
Source:
The Foundations of Positive and Normative Economics
Author(s):

ANDREW SCHOTTER

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195328318.003.0003

Like any other science, economics, as suggested by Milton Friedman, aims to come up with a “hypothesis” or “theory” that can possibly explain certain phenomena. The author of this chapter attempts to test theory by comparing choices made in the laboratory with specific predictions. The process of discovery, like that practiced in other sciences, involves the conceptualization of a theory, testing it empirically through experimentation, and modifying it with the aid of empirical or experimental evidence. In choosing the data to be used in such experiments, one has to consider that direct observable indicators like prices are the only reliable sources when dealing with conventional theory. On the other hand, choices that account for emotions, beliefs, and other such sources are essential when taking an operationalist view.

Keywords:   science, economics, Milton Friedman, hypothesis, theory, reliable data, operationalist view, conventional theory, discovery

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