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Credible worlds: the status of theoretical models in economics

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  • Robert Sugden

Abstract

Using 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.

Suggested Citation

  • Robert Sugden, 2001. "Credible worlds: the status of theoretical models in economics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 7(1), pages 1-31.
  • Handle: RePEc:taf:jecmet:v:7:y:2001:i:1:p:1-31
    DOI: 10.1080/135017800362220
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    References listed on IDEAS

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    1. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, April.
    2. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, April.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Production function and preference relation: Archetypes of economics
      by Matt Nolan in TVHE on 2013-01-25 02:00:15
    2. On economics as method
      by Matt Nolan in TVHE on 2013-06-20 01:10:25

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    Cited by:

    1. Horacio A. Aguirre, 2011. "On the “Science” of Monetary Policy: Methodological Notes," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(64), pages 83-115, October -.

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