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Economic Models as Analogies

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Author Info

  • Itzhak Gilboa

    () (HEC, Paris, and Tel-Aviv University)

  • Andrew Postlewaite

    () (Department of Economics, University of Pennsylvania)

  • Larry Samuelson

    () (Department of Economics, Yale University)

  • David Schmeidler

    () (The InterDisciplinary Center in Herzliya, and TAU)

Abstract

People often wonder why economists analyze models whose assumptions are known to be false, while economists feel that they learn a great deal from such exercises. We suggest that part of the knowledge generated by academic economists is case-based rather than rule-based. That is, instead of offering general rules or theories that should be contrasted with data, economists often analyze models that are “theoretical cases”, which help understand economic problems by drawing analogies between the model and the problem. According to this view, economic models, empirical data, experimental results and other sources of knowledge are all on equal footing, that is, they all provide cases to which a given problem can be compared. We offer some complexity arguments that explain why case-based reasoning may sometimes be the method of choice; why economists prefer simple examples; and why a paradigm may be useful even if it does not produce theories.

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File URL: http://economics.sas.upenn.edu/system/files/12-001.pdf
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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-001.

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Length: 32 pages
Date of creation: 07 Dec 2011
Date of revision:
Handle: RePEc:pen:papers:12-001

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Related research

Keywords: Methodology; Case-based reasoning;

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References

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  1. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, 01.
  2. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
  3. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
  4. Kareen Rozen, 2008. "Foundations of Intrinsic Habit Formation," Levine's Working Paper Archive 122247000000002062, David K. Levine.
  5. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521003117.
  6. Aragones, E. & Gilboa, I. & Postlewaite, A. & Schmeidler, D., 2001. "Rhetoric and Analogies," Papers 2001-15, Tel Aviv.
  7. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. New Paper: Economic Models as Analogies by Itzhak Gilboa et. al.
    by N. Emrah Ayd?nonat in N. Emrah Aydınonat (English) on 2012-01-14 20:53:37

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