October 21, 2005 12:18masterSheet number 11 Page number ixIntroductionAs a new graduate student, you are at the beginning of a new stageof your life.In a few months you will be overloaded with defi-nitions, concepts, and models.Your teachers will be guiding youinto the wonders of economics and will rarely have the time to stopto raise fundamental questions about what these models are sup-posed to mean. It is not unlikely that you will be brainwashed bythe professional-sounding language and hidden assumptions. I amafraid I am about to initiate you into this inevitable process. Still, Iwant to use this opportunity to pause for a moment and alert youto the fact that many economists have strong and conﬂicting viewsabout what economic theory is. Some see it as aset of theoriesthatcan (or should) be tested. Others see it as abag of toolsto be usedby economic agents, and yet others see it as aframeworkthroughwhich professional and academic economists view the world.
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