Credible worlds: the status of theoretical models in economics
AbstractUsing as examples Akerlof's 'market for ''lemons''' and Schelling's 'checkerboard' model of racial segregation, this paper asks how economists' abstract theoretical models can explain features of the real world. It argues that such models are not abstractions from, or simplifications of, the real world. They describe counterfactual worlds which the modeller has constructed. The gap between model world and real world can be filled only by inductive inference, and we can have more confidence in such inferences, the more credible the model is as an account of what could have been true.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Economic Methodology.
Volume (Year): 7 (2001)
Issue (Month): 1 ()
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- Horacio A. Aguirre, 2011. "On the â€œScienceâ€ of Monetary Policy: Methodological Notes," Ensayos EconÃ³micos, Central Bank of Argentina, Economic Research Department, Central Bank of Argentina, Economic Research Department, vol. 1(64), pages 83-115, October -.
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