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A Bayesian Treatment of Duhem's Thesis: The Case of the ‘Farm Problem’ in Agricultural Economics

Published online by Cambridge University Press:  05 December 2008

David Dearmont  and
David A. Bessler
David Dearmont
Affiliation:
Nebraska Department of Revenue
David A. Bessler
Affiliation:
Texas A & M University
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Extract

In this paper we consider a Bayesian treatment of ‘Duhem's thesis’, the proposition that theories are never refuted on empirical grounds because they cannot be tested in isolation from auxiliary hypotheses about initial conditions or the operation of scientific instruments. Sawyer, Beed, and Sankey (1997) consider Duhem's thesis (and its restatement in stronger and weaker forms as the ‘Duhem-Quine thesis’) and its role in hypothesis testing, using four theories from economics and finance as examples. Here we consider Duhem's thesis in the context of theory choice, econometric results, and the ‘farm problem’ in agricultural economics. This problem is defined as persistently low and highly variable prices, incomes, and returns in the agricultural sector as compared to the nonagricultural sector of the U.S. economy. The existence of the farm problem tends to refute an implication of general equilibrium (GE) theory — that resources flow to equate returns between sectors of the economy. We discuss Duhem's thesis in the context of demonstrating why evidence supporting the farm problem has not diminished the standing of general equilibrium theory among agricultural economists.

Type
Essays
Information
Economics & Philosophy , Volume 13 , Issue 2 , October 1997 , pp. 149 - 158
Copyright
Copyright © Cambridge University Press 1997

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