How Can We Select a Good Theory?
A good theory must explain not only phenomena of a similar kind, but also phenomena that are contrary to one another. Your explanations of the opposite phenomena arise from the same underlying theory, with parameters of constraints instead of a new ad hoc postulate.
Theory is an instrument for economizing thought. Mastering a good theory saves us time comparing with reading more random books.
There are many theories in economics. What's the criteria to select a good one? The consequence of making a bad choice is worse than you think. It not only wastes your time, but also provides you with a feeling of explanatory closure without the substance.
A theory proves its explanatory power not merely by accounting for phenomena of a similar kind, but by explaining seemingly contrary phenomena through the same underlying logic. Without resorting to separate, ad hoc postulates for each case, the outcome of all explanations rest in their constraints.
