The Interplay of Data and Theory in Economics
In economics, there is a crucial interplay between empirical data and theory. Data serves the primary function of validating or refuting economic models, allowing researchers to, in the words of James Heckman, "discriminate among alternative explanations." This empirical grounding prevents theory from becoming disconnected from reality. As Thomas Piketty cautions, economists can sometimes focus too much on sophisticated theory without understanding the basic facts they are trying to explain. At the same time, economic theory is essential for providing structure to research. Heckman notes that theory is necessary to help organize one's thinking and to form hypotheses that can then be tested against the data.
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Learn After
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