Williamson (2008) (pdf) concludes with a description of four injunctions for doing good economics, which I will quote verbatim.
Robert Solow’s prescription for doing good economics is set out in three injunctions: keep it simple; get it right; make it plausible (2001, p. 111). Keeping it simple entails stripping away the inessentials and going for the main case (the jugular). Getting it right “includes translating economic concepts into accurate
mathematics (or diagrams, or words) and making sure that further logical operations are correctly performed and verified” (Solow, 2001, p. 112). Making it plausible entails describing human actors in (reasonably) veridical ways and maintaining meaningful contact with the phenomena of interest (contractual or otherwise).
To this, moreover, I would add a fourth injunction: derive refutable implications to which the relevant (often microanalytic) data are brought to bear. Nicholas Georgescu-Roegen has a felicitous way of putting it: “The purpose of science in general is not prediction, but knowledge for its own sake,” yet prediction is “the touchstone of scientific knowledge” (1971, p. 37).
Why the fourth injunction? This is necessitated by the need to choose among alternative theories that purport to deal with the same phenomenon—say vertical integration—and (more or less) satisfy the first three injunctions. Thus assume that all of the models are tractable, that the logic of each hangs together, and that agreement cannot be reached as to what constitutes veridicality and meaningful contact with the phenomena. Does each candidate theory then have equal claimsfor our attention? Or should we be more demanding? This is where refutable implications and empirical testing come in: ask each would-be theory to stand up and be counted.
Why more economists are not insistent upon deriving refutable implications and submitting these to empirical tests is a puzzle. One possibility is that the world of theory is set apart and has a life of its own. A second possibility is that some economists do not agree that refutable implications and testing are
important. Another is that some theories are truly fanciful and their protagonists would be discomfited by disclosure. A fourth is that the refutable implications of favored theories are contradicted by the data. And perhaps there are still other reasons. Be that as it may, a multiplicity of theories, some of which are
vacuous and others of which are fanciful, is an embarrassment to the pragmatically oriented members of the tribe. Among this subset, insistence upon the fourth injunction—derive refutable implications and submit these to the data—is growing.
Williamson, Oliver E. “Transaction cost economics.” Handbook of new institutional economics. Springer, Berlin, Heidelberg, 2008. 41-65.