Abstract
This paper is in two parts. The first part recounts the implications of Morgenstern’s concept of ‘theory absorption’ for three economic theories. First, the concept of the core, as it exists within the game-theoretical account of bilateral markets, is shown to lead to self-destroying predictions. Second, the traditional theory of consumer behavior is shown to be untestable in the face of absorption of alternative theories. Finally, the random walk theory of stock price behavior is shown to be immune to absorption, i.e., the theory is absorption proof. The second part of the paper presents the standard account of the economics of information and traces the implications of an inductive logic formalization of absorption upon that account. It is shown that the primary theorem of the standard account does not hold for the revised theory.
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Dacey, R. (1981). Some Implications of ‘Theory Absorption’ for Economic Theory and the Economics of Information. In: Pitt, J.C. (eds) Philosophy in Economics. The University of Western Ontario Series in Philosophy of Science, vol 16. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-8394-6_8
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DOI: https://doi.org/10.1007/978-94-009-8394-6_8
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