Testing Theories

Byron D. Eastman
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Byron D. Eastman: Laurentian University

Chapter 5 in Interpreting Mathematical Economics and Econometrics, 1984, pp 43-58 from Palgrave Macmillan

Abstract: Abstract A great deal of the theorising in economics uses the techniques of the differential and integral calculus discussed in the preceding chapters. Although many theories are interesting in themselves and the mathematical processes passed through have an innate ‘beauty’ of their own, the purpose of a theory is to explain. The test of a theory is how well it explains. Good theories explain very well; bad theories explain poorly. The usual way to test a theory is to subject it to the available evidence and if the predictions of the theory are borne out by the data the theory is good. If the data representing the variables move in relationships that are different from those specified in the theory, the theory is rejected.

Keywords: Error Term; Ordinary Little Square; Sampling Distribution; Unbiased Estimator; Test Theory (search for similar items in EconPapers)
Date: 1984
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DOI: 10.1007/978-1-349-17702-8_5

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