According to some transport economists encouraging more [...]]]> According to the Pope and Archbishop Pell promoting condom use in Africa will reduce the incidence of AIDS among those who use them but will encourage promiscuity thereby increasing the overall incidence of AIDS.  Contrary views dominate the literature.

According to some transport economists encouraging more fuel efficient cars will reduce fuel usage over given travel distances but will create incentives for people to drive further since it now costs less thus possibly increasing aggregate fuel usage via a rebound effect.

According to some opposed to harm minimisation policies in relation to drug use such institutions as Safe Injecting Rooms will reduce the probability of fatal overdose deaths among illicit drug users who use these rooms but provide improved incentives to initiate drug use thus potentially increasing drug deaths overall.

Only very recently colleagues of mine have suggested that improving water use efficiencies – reduces water losses – will reduce water availability downstream from the sites of efficiency gain.

Finally, as has long been argued installing seat belts in cars reduces mortality in accidents but induces less safe driving thus increasing accident numbers.

I don’t want to argue the issue of whether these claims are or are not sound.  I only want to point out the pervasiveness of such arguments. All these arguments point to a definite theoretical claim whose validity depends on the empirical size of direct versus indirect effects. There are many other analogous contentions such as the very significant second-best effects of environmental taxes on labour markets that wipe out the case for environmental taxes if the taxed good is a substitute for leisure – this need not be the case if the goods are complements.

I have never pursued empirical econometrics preferring theory. But we need theory to identify plausible hypotheses and need econometrics to choose between seemingly equally plausible a priori theoretical predictions in many important areas of applied economics.  You cannot ‘think’ you way around such important policy issues – evidence is needed.