> “But science demands more than deduction — it requires theories to survive contact with data. Enter econometrics: the statistical battlefield where elegant theories either emerge victorious or die screaming.”
Are there good examples of empirical work overturning theory? It seems that often, when the result is unexpected, the takeaway is that the empirics are flawed rather than the theory incorrect.
The minimum wage could be an example, but many will argue the original DiD papers were quite flawed. The monopsony power explanation is also heavily contested anyways.
Absolutely, empirical work has overturned or reshaped theory in economics, though often after intense scrutiny and debate. Classic examples include the breakdown of the Phillips Curve during stagflation, anomalies challenging the Efficient Market Hypothesis (prompting the development of Behavioral Finance and Behavioral Economics), and consumption patterns inconsistent with the Permanent Income Hypothesis. It’s true that empirical surprises first face skepticism, but persistent, robust evidence ultimately drives theoretical progress and refinement.
Since you didn't define income I'm assuming you use it as commonly understood: Money (or some alternative) earned through work or investment.
Now take the following sections from your article, on fundamental laws and budget constraints:
"This is a budget constraint, commonly used in microeconomics. It states that an agent cannot consume more than their income, whether that be money or an equivalent monetary commodity, allows them to."
And
"The budget constraint is law."
This is exactly the kind of statements that make people say that economics is not a real science. How can you write an article saying that economics is super scientific, and all of that, and then begin your 'foundational laws' with an obviously false statement. As an economist, have you never heard of a loan? (or a gift, or theft, but lets focus on loans). A loan is something which allows you to consume more than your income, ergo your foundational law is wrong. And not wrong as Newton's theory on gravity, which describes observable events in the world correctly but is probably wrong about the underlying mechanisms due to the complexity of how it all works, but wrong as in this is not what happens in the real world and it therefore cannot be observed.
Loans are actually foundational to our entire monetary & financial system, therefore need to be integrated in any economic analysis from start.
And yes, simple loans, in theory need to be paid back: However, again, empirical observation will tell you this doesn't always happen. Some people go bankrupt, some people die before paying it back, some loans are not paid back ever and earn interest in perpetuity, some are rolled over, some can be exchanged for stock, etc. That's why people like Fisher and Minsky, to name just the obvious ones, were so interested in the financial system, and debt, and all of that, because it is foundational to, and therefore fundamentally affects, how the economy functions.
Totally fair point -- but in microeconomics, income doesn’t just mean a paycheck. It refers to all available resources, including credit. Just like 'rational' has a technical meaning in econ, so does income. The budget constraint still holds; it just shifts when borrowing is possible.
"By 1935 economics entered into a mathematical epoch. It became easier for a camel to pass through the eye of a needle than for a non-mathematical genius to enter into the pantheon of original theorists.”
Not exactly true. The justly famed Stolper Samuelson trade theorem does not need advanced mathematics at all to demonstrate. To be true, "original" has to work extra hard.
> “But science demands more than deduction — it requires theories to survive contact with data. Enter econometrics: the statistical battlefield where elegant theories either emerge victorious or die screaming.”
Are there good examples of empirical work overturning theory? It seems that often, when the result is unexpected, the takeaway is that the empirics are flawed rather than the theory incorrect.
The minimum wage could be an example, but many will argue the original DiD papers were quite flawed. The monopsony power explanation is also heavily contested anyways.
Absolutely, empirical work has overturned or reshaped theory in economics, though often after intense scrutiny and debate. Classic examples include the breakdown of the Phillips Curve during stagflation, anomalies challenging the Efficient Market Hypothesis (prompting the development of Behavioral Finance and Behavioral Economics), and consumption patterns inconsistent with the Permanent Income Hypothesis. It’s true that empirical surprises first face skepticism, but persistent, robust evidence ultimately drives theoretical progress and refinement.
Since you didn't define income I'm assuming you use it as commonly understood: Money (or some alternative) earned through work or investment.
Now take the following sections from your article, on fundamental laws and budget constraints:
"This is a budget constraint, commonly used in microeconomics. It states that an agent cannot consume more than their income, whether that be money or an equivalent monetary commodity, allows them to."
And
"The budget constraint is law."
This is exactly the kind of statements that make people say that economics is not a real science. How can you write an article saying that economics is super scientific, and all of that, and then begin your 'foundational laws' with an obviously false statement. As an economist, have you never heard of a loan? (or a gift, or theft, but lets focus on loans). A loan is something which allows you to consume more than your income, ergo your foundational law is wrong. And not wrong as Newton's theory on gravity, which describes observable events in the world correctly but is probably wrong about the underlying mechanisms due to the complexity of how it all works, but wrong as in this is not what happens in the real world and it therefore cannot be observed.
Loans are actually foundational to our entire monetary & financial system, therefore need to be integrated in any economic analysis from start.
And yes, simple loans, in theory need to be paid back: However, again, empirical observation will tell you this doesn't always happen. Some people go bankrupt, some people die before paying it back, some loans are not paid back ever and earn interest in perpetuity, some are rolled over, some can be exchanged for stock, etc. That's why people like Fisher and Minsky, to name just the obvious ones, were so interested in the financial system, and debt, and all of that, because it is foundational to, and therefore fundamentally affects, how the economy functions.
Totally fair point -- but in microeconomics, income doesn’t just mean a paycheck. It refers to all available resources, including credit. Just like 'rational' has a technical meaning in econ, so does income. The budget constraint still holds; it just shifts when borrowing is possible.
"By 1935 economics entered into a mathematical epoch. It became easier for a camel to pass through the eye of a needle than for a non-mathematical genius to enter into the pantheon of original theorists.”
Not exactly true. The justly famed Stolper Samuelson trade theorem does not need advanced mathematics at all to demonstrate. To be true, "original" has to work extra hard.