Theory and Measurement: Emergence, Consolidation, and Erosion of a Consensus

We identify three separate stages in the post–World War II history of applied microeconomic research: a generally nonmathematical period; a period of consensus (1960s through early 1990s) characterized by the use of mathematical models, optimization, and equilibrium to generate and test economic hypotheses; and (from the late 1990s) a partial abandonment of economic theory in applied work in the “experimentalist paradigm.” We document these changes by coding the content of all applied micro articles published in the “Top 5 journals” in 1951–55, 1974–75 and 2007–8. We also show that, despite the partial abandonment of theory by applied microeconomists, the labor market for economists still pays a wage premium to theorists.