Introduction
Introduction
Chapter I begins by describing the salient parts of a formal science of economics that the author has put together in this book and in earlier works (B.P. Stigum 1990 and 2003). The parts comprise a unitary methodological basis for a science, an explication of the meaning of facts and fiction in econometrics, and a confrontation of the methods of present-day applied econometrics with the methods that a formal science advocates. Next the chapter discusses interesting ways in which the axiomatic method and the model-theoretic method of developing theories are used in mathematical economics and statistics, and describes the underlying ideas of a formal theory-data confrontation. Thereafter follows a discussion of three controversial aspects of formal econometrics: (1) the essence of an economic theory; (2) the double role of theory in applied econometrics and the need for bridge principles; and (3) why theory is required both for the design of an empirical analysis and for the interpretation of its results. The chapter ends with a brief description of the contents of the remaining nine chapters.
Keywords: Formal science, unitary methodological basis, axiomatic method, model-theoretic method, theory-data confrontation, essence of an economic theory, bridge principles, theory universe, upper data universe, lower data universe
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