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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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Keywords: Methodology; Case-based reasoning;

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References

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  1. Kareen Rozen, 2008. "Foundations of Intrinsic Habit Formation," Levine's Working Paper Archive 122247000000002062, David K. Levine.
  2. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
  3. Aragones, E. & Gilboa, I. & Postlewaite, A. & Schmeidler, D., 2001. "Rhetoric and Analogies," Papers 2001-15, Tel Aviv.
  4. Itzhak Gilboa & Offer Lieberman & David Schmeidler, 2004. "Empirical Similarity," Cowles Foundation Discussion Papers 1486, Cowles Foundation for Research in Economics, Yale University.
  5. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, November.
  6. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, November.
  7. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  8. Uskali Maki, 2005. "Models are experiments, experiments are models," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(2), pages 303-315.
  9. Till Grune-Yanoff & Paul Schweinzer, 2008. "The roles of stories in applying game theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 15(2), pages 131-146.
  10. 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.
  11. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Levine's Working Paper Archive 786969000000000126, David K. Levine.
  12. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
  13. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521802345, November.
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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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Cited by:
  1. Aragones, Enriqueta & Gilboa, Itzhak & Postlewaite, Andrew & Schmeidler, David, 2014. "Rhetoric and analogies," Research in Economics, Elsevier, vol. 68(1), pages 1-10.

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