Suppose I proposed the following theory of economic development:The root cause of economic development is social capacity. Highly-developed societies have immense social capacity, as evidenced by their countless achievements. Backwards societies lack social capacity, as evidenced by their countless problems. You'd probably be unimpressed. At first glance, this is a circular theory that explains nothing: Why are things so good in X? Because X has great social capacity. How do we know X has great social capacity? Because things are so good in X!On closer consideration, though, the social capacity theory is not utterly empty. It makes one grand empirical prediction: Good social outcomes correlate.
Bryan Caplan considers the following as important: Behavioral Economics and Rationality
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