Mainstream economists believe our knowledge of the world of economics is elusive, so the criteria for choosing a theory should be its predictive power. If the theory “predicts,” it is regarded as a valid framework to assess the economy. Once a theory fails in that role, the search for a new theory begins.For instance, an economist believes that consumer outlays on goods and services are determined by disposable income. Once this view is validated by statistical methods, it is used to assess the future direction of consumer spending. If the theory fails to produce accurate forecasts, it is either replaced or modified by adding some other explanatory variables. This way of thinking implies that our knowledge of the world of economics is elusive.Since we cannot establish “how things really
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