Data and theory in economics

Noah Smith on the Nobel for the architects of the “credibility revolution” in economics:

Anyone who expects the credibility revolution to replace theory is going to be disappointed. Science seeks not merely to catalogue things that happen, but to explain why — chemistry is more than a collection of reaction equations, biology is more than a catalogue of drug treatment effects, and so on. Econ will be the same way. But what the credibility revolution does do is to change the relationship between theory and evidence. When evidence is credible, it means that theory must bend to evidence’s command — it means that theories can be wrong, at least in a particular time and place. And that means that every theory that can be checked with credible evidence needs to be checked before it’s put to use in real-world policymaking. Just like you wouldn’t prescribe patients a vaccine without testing it first. This is a very new way for economists to have to force themselves to think. But this is a field in its infancy — we’re still at the Francis Bacon/Galileo stage. Give it time.

In other words, new empirical techniques brought economics closer to following Michael Strevens’ iron rule of explanation: “that all arguments must be carried out with reference to empirical evidence.”

Quartz’s coverage of the Nobel is here and here.