IDEAS home Printed from https://ideas.repec.org/p/pen/papers/13-007.html
   My bibliography  Save this paper

Economic Models as Analogies, Third Version

Author

Listed:
  • 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 complexity arguments that explain why case-based reasoning may sometimes be the method of choice and why economists prefer simple cases.

Suggested Citation

  • Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2012. "Economic Models as Analogies, Third Version," PIER Working Paper Archive 13-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 27 Jan 2013.
    • Handle: RePEc:pen:papers:13-007
    as

    Download full text from publisher

    File URL: https://economics.sas.upenn.edu/sites/default/files/filevault/13-007.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, January.
    2. John B. Davis & D. W. Hands & Uskali Mäki (ed.), 1998. "The Handbook of Economic Methodology," Books, Edward Elgar Publishing, number 741.
    3. Uskali Maki, 2005. "Models are experiments, experiments are models," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(2), pages 303-315.
    4. Aragones, Enriqueta & Gilboa, Itzhak & Postlewaite, Andrew & Schmeidler, David, 2014. "Rhetoric and analogies," Research in Economics, Elsevier, vol. 68(1), pages 1-10.
    5. Kareen Rozen, 2010. "Foundations of Intrinsic Habit Formation," Econometrica, Econometric Society, vol. 78(4), pages 1341-1373, July.
    6. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521802345.
    7. Itzhak Gilboa & Offer Lieberman & David Schmeidler, 2012. "Empirical Similarity," World Scientific Book Chapters, in: Case-Based Predictions An Axiomatic Approach to Prediction, Classification and Statistical Learning, chapter 9, pages 211-243, World Scientific Publishing Co. Pte. Ltd..
    8. Gayer, Gabrielle & Gilboa, Itzhak, 2014. "Analogies and theories: The role of simplicity and the emergence of norms," Games and Economic Behavior, Elsevier, vol. 83(C), pages 267-283.
    9. 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.
    10. Bernard Walliser, 2011. "Comment raisonnent les économistes : les fonctions des modèles," PSE-Ecole d'économie de Paris (Postprint) halshs-00754906, HAL.
    11. 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.
    12. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    13. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, December.
    14. Lars Peter Hansen & Thomas J Sargent, 2014. "Robust Control and Model Uncertainty," World Scientific Book Chapters, in: UNCERTAINTY WITHIN ECONOMIC MODELS, chapter 5, pages 145-154, World Scientific Publishing Co. Pte. Ltd..
    15. Eddie Dekel & Barton L. Lipman, 2010. "How (Not) to Do Decision Theory," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 257-282, September.
    16. 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.
    17. Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, December.
    18. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    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 Aydınonat in N. Emrah Aydınonat (English) on 2012-01-15 02:53:37

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas J. Sargent, 2015. "Robert E. Lucas Jr.'s Collected Papers on Monetary Theory," Journal of Economic Literature, American Economic Association, vol. 53(1), pages 43-64, March.
    2. Aragones, Enriqueta & Gilboa, Itzhak & Postlewaite, Andrew & Schmeidler, David, 2014. "Rhetoric and analogies," Research in Economics, Elsevier, vol. 68(1), pages 1-10.
    3. Andrea Salanti, 2013. "Between the Scylla of Whig history and the Charybdis of methodological vacuum," Chapters, in: Marcel Boumans & Matthias Klaes (ed.), Mark Blaug: Rebel with Many Causes, chapter 14, pages 191-207, Edward Elgar Publishing.
    4. Paul Pfleiderer, 2014. "Camaleones: el mal uso de modelos teóricos en finanzas y economía," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 16(31), pages 23-30, July-Dece.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. I. Gilboa & A. Postlewaite & L. Samuelson & D. Schmeidler, 2015. "Economic models as analogies," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    2. Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2014. "A Model of Modeling," PIER Working Paper Archive 14-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2018. "Economics: Between Prediction And Criticism," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 367-390, May.
    4. Itzhak Gilboa & Andrew Postlewaite & Larry Samuelson & David Schmeidler, 2016. "Economics: Between Prediction and Criticism, Second Version," PIER Working Paper Archive 16-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 Oct 2016.
    5. Francesco Guala & Andrea Salanti, 2002. "On the Robustness of Economic Models," Working Papers (-2012) 0208, University of Bergamo, Department of Economics.
    6. Massimo Marinacci, 2015. "Model Uncertainty," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1022-1100, December.
    7. Wichardt, Philipp C., 2014. "Models and Fictions in (Micro-)Economics," Working Papers 2014:31, Lund University, Department of Economics, revised 12 Sep 2014.
    8. Vatn, Arild, 2005. "Rationality, institutions and environmental policy," Ecological Economics, Elsevier, vol. 55(2), pages 203-217, November.
    9. Hansen, Lars Peter & Sargent, Thomas J., 2022. "Structured ambiguity and model misspecification," Journal of Economic Theory, Elsevier, vol. 199(C).
    10. repec:esx:essedp:770 is not listed on IDEAS
    11. Marciano Siniscalchi, 2009. "Vector Expected Utility and Attitudes Toward Variation," Econometrica, Econometric Society, vol. 77(3), pages 801-855, May.
    12. Strzalecki, Tomasz & Werner, Jan, 2011. "Efficient allocations under ambiguity," Journal of Economic Theory, Elsevier, vol. 146(3), pages 1173-1194, May.
    13. Ivan Moscati, 2022. "Behavioral and heuristic models are as-if models too — and that’s ok," BAFFI CAREFIN Working Papers 22177, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    14. Morten Søberg, 2002. "The Duhem-Quine thesis and experimental economics. A reinterpretation," Discussion Papers 329, Statistics Norway, Research Department.
    15. Blavatskyy, Pavlo R., 2013. "Two examples of ambiguity aversion," Economics Letters, Elsevier, vol. 118(1), pages 206-208.
    16. Simone Cerreia†Vioglio & Lars Peter Hansen & Fabio Maccheroni & Massimo Marinacci, 2020. "Making Decisions under Model Misspecification," Working Papers 2020-103, Becker Friedman Institute for Research In Economics.
    17. Grant, Simon & Polak, Ben, 2013. "Mean-dispersion preferences and constant absolute uncertainty aversion," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1361-1398.
    18. Claudio Michelacci & Luigi Paciello, 2020. "Aggregate Risk or Aggregate Uncertainty? Evidence from UK Households," EIEF Working Papers Series 2006, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2020.
    19. Ghirardato, Paolo & Pennesi, Daniele, 2020. "A general theory of subjective mixtures," Journal of Economic Theory, Elsevier, vol. 188(C).
    20. Ortoleva, Pietro, 2010. "Status quo bias, multiple priors and uncertainty aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 411-424, July.
    21. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2017. "Mixed extensions of decision problems under uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(4), pages 827-866, April.

    More about this item

    Keywords

    Methodology; Case-based reasoning;

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pen:papers:13-007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Administrator (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.