preceding list of analogical questions. Viewed as elements of the inguage of economic theory, these are the two major categories into which factors affecting the relative prices of products or factors of production are classified. The usefulness of the dichotomy depends on the "empirical generalization that an enumeration of the forces affecting demand in any problem and of the forces affecting supply will yield two lists that contain few items in common. Now this generalization is valid for markets like the final market for consumer good. In such a market there is a clear and sharp distinction between the economic units that can be regarded as demanding the product and those that can be regarded as supplying it. There is seldom much doubt whether a particular factor should be classified as affecting supply, on the one hand, or demand, on the other; and there is seldom much necessity for considering cross-effects (cross-references) between the two categories. In these cases the simple and even obvious step of filing the relevant factors under the headings of"supply"and"demand"effects a great simplification of the problem and is an effective safeguard against fallacies that otherwise tend to occur. But the generalization is not always valid For example, it is not valid for the day-to-day fluctuations of prices in a primarily speculative market Is a rumor of an increased excess-profits tax, for example, to be regarded as a factor operating primarily on today s supply of corporate equities in the stock market or on today's demand for them? In similar fashion, almost every factor can with about as much justification be classified under the heading"supply"as under the heading demand. "These concepts can still be used and may not be entirely pointless; they are still"right but clearly less useful than in the first example because they have no meaningful empirical counterpart Viewed as a body of substantive hypotheses, theory is to be judged by its predictive power for the class of phenomena which it is intended to"explain "Only factual evidence can show whether it is right"or wrong"or, better, tentatively "accepted"as valid or rejected. As I shall argue at greater length below, the only relevant test of the validity of a hypothesis is 7. The Marshallian Demand Curve, " infra, p. 578 preceding list of analogical questions. Viewed as elements of the language of economic theory, these are the two major categories into which factors affecting the relative prices of products or factors of production are classified. The usefulness of the dichotomy depends on the "empirical generalization that an enumeration of the forces affecting demand in any problem and of the forces affecting supply will yield two lists that contain few items in common.7 Now this generalization is valid for markets like the final market for a consumer good. In such a market there is a clear and sharp distinction between the economic units that can be regarded as demanding the product and those that can be regarded as supplying it. There is seldom much doubt whether a particular factor should be classified as affecting supply, on the one hand, or demand, on the other; and there is seldom much necessity for considering cross-effects (cross-references) between the two categories. In these cases the simple and even obvious step of filing the relevant factors under the headings of "supply" and "demand" effects a great simplification of the problem and is an effective safeguard against fallacies that, otherwise tend to occur. But the generalization is not always valid. For example, it is not valid for the day-to-day fluctuations of prices in a primarily speculative market, Is a rumor of an increased excess-profits tax, for example, to be regarded as a factor operating primarily on today's supply of corporate equities in the stock market or on today's demand for them? In similar fashion, almost every factor can with about as much justification be classified under the heading "supply" as under the heading "demand." These concepts can still be used and may not be entirely pointless; they are still "right" but clearly less useful than in the first example because they have no meaningful empirical counterpart. Viewed as a body of substantive hypotheses, theory is to be judged by its predictive power for the class of phenomena which it is intended to "explain." Only factual evidence can show whether it is "right" or "wrong" or, better, tentatively "accepted" as valid or "rejected." As I shall argue at greater length below, the only relevant test of the validity of a hypothesis is 7. "The Marshallian Demand Curve," infra, p. 57