Economic Theories and Their Dueling Interpretations

The interpretation of economic theories varies along several dimensions. First, theories can describe reality, illustrate a recommended state of affairs, or analyze the logical consistency of a possible world. Second, theories can be used for prediction
or for explanation. Third, theories can relate to reality in a rule-based or case-based manner. Fourth, theories can be statements about economic reality or about the act of economic reasoning itself. Fifth, theories can offer predictions or merely critique reasoning. We argue that theories are often open to multiple interpretations which
can shift depending on the context in which the theory is applied, the surrounding economic literature, and the argument made by the interpreter.