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Economic Models as Analogies, Second Version

  • 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, Herzliya and TAU)

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 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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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-030.

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Length: 44 pages
Date of creation: 27 Dec 2011
Date of revision: 31 Jul 2012
Handle: RePEc:pen:papers:12-030
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  1. Strzalecki, Tomasz, 2011. "Axiomatic Foundations of Multiplier Preferences," Scholarly Articles 14397610, Harvard University Department of Economics.
  2. Uskali Maki, 2005. "Models are experiments, experiments are models," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(2), pages 303-315.
  3. Enriqueta Aragones & Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2013. "Rhetoric and Analogies," UFAE and IAE Working Papers 932.13, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Itzhak Gilboa & David Schmeidler, 2001. "A Theory of Case-Based Decisions," Post-Print hal-00756321, HAL.
  5. Itzhak Gilboa & Offer Lieberman & David Schmeidler, 2004. "Empirical Similarity," Levine's Bibliography 122247000000000684, UCLA Department of Economics.
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  10. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, Junio.
  11. 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.
  12. 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.
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  15. Bernard Walliser, 2011. "Comment raisonnent les économistes : les fonctions des modèles," Post-Print halshs-00754906, HAL.
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