The Positive Economics of Methodology
Abstract Does an observation that is consistent with a theory constitute stronger evidence for that theory if it was made after the theory was proposed rather than before (when the observation might have influenced the theory's formation)? How and why might the research strategy of theorizing prior to observation affect the conditional probability that the theory is true? Is there a socially optimal set of research strategies and on what does it depend? In a world of asymmetric information, what incentive structure can induce that social optimum? This paper answers these questions in a simple, stylized model that provides a starting point for a rigorous economic model of scientific method. Journal of Economic Literature Classification Number: A10.