In discussing Paul Romer's wonderful concept of mathiness*, Peter Dorman criticizes economists' habit of declaring a theory successful merely because it is "consistent with" the evidence. His point deserves emphasis.

If a man has no money, this is "consistent with" the theory that he has given it away. But if in fact he has been robbed, that theory is grievously wrong. Mere consistency with the facts is not sufficient.

This is a point which some defenders of inequality miss. Of course, you can devise theories which are "consistent with" inequality arising from reasonable differences in choices and marginal products. Such theories, though, beg the question: is that how inequality really emerged?** And the answer, to put it mildly, is: only partially. It also arose from luck, inefficient selection, rigged markets, rent-seeking and outright theft.

However, it's not just defenders of inequality who make the "consistent with" error.

Rational choice theorists have sometimes been too keen to explain apparently odd behaviour as "consistent with" rational maximizing: the notion of rational addiction might be the most egregious example of this.

Equally, though, behaviouralists might sometimes be too quick to see behaviour as "consistent with" people suffering from cognitive biases and too slow to see instead that it might be due to rational behaviour subject to particular information sets or incentives: I'm pretty sure I've been guilty of this.

Quite often, the facts are consistent with either theory. For example, the well-attested momentum anomaly - the tendency for assets that have risen in price recently to continue rising - is "consistent with" both a cognitive bias (under-reaction) and with rational behaviour; fund managers' desire to avoid benchmark risk.

My point here should be well-known. The Duhem-Quine thesis warns us that facts under-determine theory: they are "consistent with" multiple theories. This is perhaps especially true when those facts are snapshots. For example, a Gini coefficient - being a mere snapshot of inequality - tells us nothing about how the inequality emerged.

So, how can we guard against the "consistent with" error? One thing we need is history: this helps tell us how things actually happened. And - horrific as it might seem to some economists - we also need sociology: we need to know how people actually behave and not merely that their behaviour is "consistent with" some theory. Economics, then, cannot be a stand-alone discipline but part of the social sciences and humanities - a point which is lost in the discipline's mathiness.

* I soooo wish this idea was around in the 80s: it would have explained a lot of my frustrations when I was a student.

** Scott Sumner is not guilty of this error, but I fear that other "libertarians" are less scrupulous.