ABSTRACT
The topic I have chosen for my contribution is the issue of the two-way link between economic thinking and facts. I will not attempt to address the complex issue of how theories are confirmed or falsified, here I wish only to explore the circumstances that prompt the return of ideas previously discarded or forgotten because they are believed to have been either disproved or surpassed by a better theory. The point has been nicely argued in a recent paper:
Understanding in economics does not proceed cumulatively. We do not necessarily know more today than we did yesterday, tempting as it may be to believe otherwise. So-called ‘lessons’ are learnt, forgotten, re-learnt and forgotten again. Concepts rise to prominence and fall into oblivion before possibly resurrecting. They do so because the economic environment changes, sometimes slowly but profoundly, at other times suddenly and violently. But they do so also because the discipline is not immune to fashions and fads. 1
In recent times facts are increasingly identified with empirical estimates of models which are believed to incorporate the progress made in the economic literature. These ‘facts’ are heavily dependent on the choice of the models and the methodology employed to find them. The relationship between facts and theory has become opaque and we may reasonably challenge the motives behind the discovery of ‘facts’, for they tend to be recognized or ignored according to the ebbs and flows of academic fashions.