Working Paper

How Empirical Evidence Does or Does Not Influence Economic Thinking and Theory

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This paper asks, how empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play?

I shall tackle these questions moving from general to specific. For the general perspective, I examine the following points of view.

1. Economics is a science.
2. Economics is an art.
3. Economics is a competition. 4. Economics is politics.

I then examine specific cases for illustration and debate.
1. Is there a Phillips curve?
2. Are prices sticky?
3. Does contractionary monetary policy lead to a contraction in output? 4. What causes business cycles?

The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.