In his paper on the “Methodology of Positive Economics”, Milton Friedman warned his readers that, “more than other scientists, social scientists need to be self-conscious about their methodology.” (1953, p. 34). But until quite recently, he seems either to have spoken to deaf ears or, more plausibly, to have been so successful in promoting his own views on methodology as to lead economists to be complacent about the many problems which plague their discipline. Many current textbooks, for example the one (...) by Eugene Silberberg, present economics as a science attaining the falsificationist standards once set down by Karl Popper, despite much evidence to the contrary. Indeed, as Douglas W. Hands (1985) has recently shown, even Sir Karl did not intend economics to be subjected to such severe standards. (shrink)

Even though Popper, Lawson and Mäki are realists, the three of them understand by realism something different and support different positions on the use of models in economics. In this article we will compare the three proposals on their conceptions of reality, the function and the nature of economic models and their use to study the social world.

There is a striking contrast between the significance of Harold Hotelling’s contribution to industrial economics and the fact that his location model was invalid, unrealistic and non-robust. It is difficult to make sense of the explanatory value of Hotelling’s model based on philosophical accounts that emphasize logical validity, representational adequacy, and robustness as determinants of explanatory value. However, these accounts are misleading because they overlook the context within which the explanatory value added of a model is apprehensible. We present Hotelling’s (...) model in its historical context and show why it is an important and explanatory model despite its apparent deficiencies. (shrink)

In Economics Rules, Dani Rodrik (2015) argues that what makes economics powerful despite the limitations of each and every model is its diversity of models. Rodrik suggests that the diversity of models in economics improves its explanatory capacities, but he does not fully explain how. I offer a clearer picture of how models relate to explanations of particular economic facts or events, and suggest that the diversity of models is a means to better economic explanations.

Policy-makers face an uncertain world. One way of getting a handle on decision-making in such an environment is to rely on evidence. Despite the recent increase in post-fact figures in politics, evidence-based policymaking takes centre stage in policy-setting institutions. Often, however, policy-makers face large volumes of evidence from different sources. Robustness analysis can, prima facie, handle this evidential diversity. Roughly, a hypothesis is supported by robust evidence if the different evidential sources are in agreement. In this thesis, I strengthen the (...) case for the use of robustness analysis in evidence-based policymaking by answering open research questions about this inference technique. First, I argue that existing taxonomies miss a fruitful category of robustness reasoning, that is predictive stability. Second, I claim that derivational robustness analysis – the investigation of whether the results of different models are in agreement – can yield interesting insights even if not the entire relevant model space is covered by available models or if the model results are only partially in agreement. Third, I claim that expert knowledge is necessary to address questions that arise when one applies measurement robustness analysis – the investigation into whether multiple means of measurement yield the same result. Finally, I argue that, in situations where evidence from different measurements is not in agreement, it can be advisable to no longer take all of the evidence into account. This can be done in a rationally defensible way by choosing the most adequate theory or model underlying parts of the evidence set. I discuss examples from climate, medical, and economic policy-making to establish my claims. (shrink)

In this paper I begin with a recent challenge to the Semantic Approach and identify an underlying assumption, namely that identity conditions for theories should be provided. Drawing on previous work, I suggest that this demand should be resisted and that the Semantic Approach should be seen as a philosophical device that we may use to represent certain features of scientific practice. Focussing on the partial structures variant of that approach, I then consider a further challenge that arises from a (...) concern with the role of idealisations in that practice. I argue that the partial structures approach is capable of meeting this challenge and I conclude with some broader observations about the role of such formal accounts within the philosophy of science. (shrink)

As the title of this essay suggests, my concern is with the issue of what are economic models. However, the goal of the paper is not to offer an in-depth study on multiple approaches to modelling in economics, but rather to overcome the dichotomical divide between conceptualizing models as isolations and constructions. This is done by introducing the idea of economic models as believable worlds, precisely descriptions of mechanisms that refer to the essentials of the modelled targets. In doing so (...) I make use of the Woodward’s (2002) conceptualization of mechanisms. It is shown that such models do not offer the perfectly true descriptions of the actual world but justified beliefs about the modelled, precisely they aim at maximizing truth and minimizing falsity in a large body of belief about the real world. The analysis throughout the paper is supported by in-depth examination of the Varian’s (1980) model of sales that is here treated as a representative way of reasoning in neoclassical economics. (shrink)

It is argued that one can learn from minimal economic models. Minimal models are models that are not similar to the real world, do not resemble some of its features, and do not adhere to accepted regularities. One learns from a model if constructing and analysing the model affects one’s confidence in hypotheses about the world. Economic models, I argue, are often assessed for their credibility. If a model is judged credible, it is considered to be a relevant possibility. Considering (...) such relevant possibilities may affect one’s confidence in necessity or impossibility hypotheses. Thus, one can learn from minimal economic models. (shrink)

“Hard obscurantism” is a species of the genus scholarly obscurantism. A rough intensional definition of hard obscurantism is that models and procedures become ends in themselves, dissociated from their explanatory functions. In the present article, I exemplify and criticize hard obscurantism by examining the writings of eminent economists and political scientists.

The paper offers an account of the structure of information provided by models that relevantly deviate from reality. It is argued that accounts of scientific modeling according to which a model’s epistemic and pragmatic relevance stems from the alleged fact that models give access to possibilities fail. First, it seems that there are models that do not give access to possibilities, for what they describe is impossible. Secondly, it appears that having access to a possibility is epistemically and pragmatically idle. (...) Based on these observations, an alternative is developed. (shrink)

The paper reviews the philosophical literature on the epistemology of modelling in contemporary economics. In particular, it focuses on open questions concerning the epistemic role of models, the validity of inferences from the models to the world, and the legitimacy of their use for purposes of explanation, prediction and intervention.

This paper examines causal theories of reference with respect to how plausible an account they give of non-physical natural kind terms such as ‘gene’ as well as of the truth of the associated theoretical claims. I first show that reference fixism for ‘gene’ fails. By this, I mean the claim that the reference of ‘gene’ was stable over longer historical periods, for example, since the classical period of transmission genetics. Second, I show that the theory of partial reference does not (...) do justice to some widely held realist intuitions about classical genetics. This result is at loggerheads with the explicit goals usually associated with partial theories of reference, which is to defend a realist semantics for scientific terms. Thirdly, I show that, contrary to received wisdom and perhaps contrary to physics and chemistry, neither reference fixism nor partial reference are necessary in order to hold on to scientific realism about biology. I pinpoint the reasons for this in the nature of biological kinds, which do not even remotely resemble natural kinds (i.e., Lockean real essences) as traditionally conceived. (shrink)

In the recent literature at the interface between economics, biology and neuroscience, several authors argue that by adopting an interdisciplinary approach to the analysis of decision making, economists will be able to construct predictively and explanatorily superior models. However, most economists remain quite reluctant to import biological or neural insights into their account of choice behaviour. In this paper, I reconstruct and critique one of the main arguments by means of which economists attempt to vindicate their conservative position. Furthermore, I (...) develop an alternative defense of the thesis that economists justifiably rely on a methodologically distinctive approach to the modelling of choice behaviour. (shrink)

In this paper, I propose that the debate in epistemology concerning the nature and value of understanding can shed light on the role of scientific idealizations in producing scientific understanding. In philosophy of science, the received view seems to be that understanding is a species of knowledge. On this view, understanding is factive just as knowledge is, i.e., if S knows that p, then p is true. Epistemologists, however, distinguish between different kinds of understanding. Among epistemologists, there are those who (...) think that a certain kind of understanding—objectual understanding—is not factive, and those who think that objectual understanding is quasi-factive. Those who think that understanding is not factive argue that scientific idealizations constitute cognitive success, which we then consider as instances of understanding, and yet they are not true. This paper is an attempt to draw lessons from this debate as they pertain to the role of idealizations in producing scientific understanding. I argue that scientific understanding is quasi-factive. (shrink)

In investigating their models, economists do not appear to engage much in the activities many philosophers take to be essential to scientific understanding of the world, activities such as testing hypotheses and establishing laws. How, then, can economic models explain anything about the real world? Borrowing from William Dray, an explanation of what something really is, as opposed to an explanation of why something happens, is the subsumption of the explanandum under a suitable concept. One way economic models explain real-world (...) phenomena is by providing explanations-what of such phenomena. In this way, economic models can afford explanations of the world without necessarily involving the activities philosophers take to be integral to scientific understanding of the world, for explanations-what do not necessarily involve the activities in question. (shrink)

The most common argument against the use of rational choice models outside economics is that they make unrealistic assumptions about individual behavior. We argue that whether the falsity of assumptions matters in a given model depends on which factors are explanatorily relevant. Since the explanatory factors may vary from application to application, effective criticism of economic model building should be based on model-specific arguments showing how the result really depends on the false assumptions. However, some modeling results in imperialistic applications (...) are relatively robust with respect to unrealistic assumptions. Key Words: unrealistic assumptions • economics imperialism • rational choice • as if • robustness. (shrink)

Contemporary economists deem virtually every piece of reasoning and argumentation in economics a model, forgetting that there may well be other conceptual tools at hand. This article demonstrates that David Hume used thought experiments to make some remarkable breakthroughs in monetary economics, and that this resolves a longstanding debate about an apparent inconsistency in Hume, between the neutrality and non-neutrality of money. In the actual world, money is never neutral for Hume; only in thought experiments does a sudden growth in (...) the money stock result in an identical and hence neutral increase in the price level. Thought experiments isolate tendencies but do not lend themselves to direct confirmation. Moreover, Hume’s dislike for the French model builders, Melon and Quesnay, captures an important juncture in mid eighteenth-century economic discourse regarding the warranted level of abstraction and of idealization. (shrink)

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

I have argued not that economics has no predictive content, but that it is limited, or at least has so far been limited to generic predictions. Now this is an important kind of prediction, and almost certainly a necessary preliminary to specific or quantitative predictions. But if the sketch of an important episode in the twentieth century history of the subject I have given is both correct and representative, then economics seems pretty well stuck at the level of generic prediction. (...) And at least some influential economists and philosophers of economics seem well satisfied with stopping at the point of generic prediction. Or at least they give no other reason than its power to produce such predictions as a justification for the character of economic theory. But this leads to the question that is the title of my paper, is generic prediction enough? (shrink)

Pictorial representations such as diagrams and figures are widely used in scientific literature for explanatory and descriptive purposes. The intuitive nature of pictorial representations coupled with texts foster a better understanding of the objects of study. Biological mechanisms and processes can be clearly illustrated and grasped in pictures. I argue that pictorial representations describe biological phenomena by telling stories. I elaborate on the role of narrative structures of pictures in the frontier research using a case study in immunology. I articulate (...) that pictures with an inherent narrative structure are crucial in biological sciences. (shrink)

In this paper I begin with a recent challenge to the Semantic Approach and identify an underlying assumption, namely that identity conditions for theories should be provided. Drawing on previous work, I suggest that this demand should be resisted and that the Semantic Approach should be seen as a philosophical device that we may use to represent certain features of scientific practice. Focussing on the partial structures variant of that approach, I then consider a further challenge that arises from a (...) concern with the role of idealisations in that practice. I argue that the partial structures approach is capable of meeting this challenge and I conclude with some broader observations about the role of such formal accounts within the philosophy of science. (shrink)

This PhD thesis focuses on the philosophical foundations of Neuroeconomics, an innovative research program which combines findings and modelling tools from economics, psychology and neuroscience to account for human choice behaviour. The proponents of Neuroeconomics often manifest the ambition to foster radical modifications in the accounts of choice behaviour developed by its parent disciplines. This enquiry provides a philosophically informed appraisal of the potential for success and the relevance of neuroeconomic research for economics. My central claim is that neuroeconomists can (...) help other economists to build more predictive and explanatory models, yet are unlikely to foster revolutionary modifications in the economic theory of choice. The contents are organized as follows. In chapters 1-2, I present neuroeconomists’ investigative tools, distinguish the most influential approaches to neuroeconomic research and reconstruct the case in favour of a neural enrichment of economic theory. In chapters 3-7, I combine insights from neuro-psychology, economic methodology and philosophy of science to develop a systematic critique of Neuroeconomics. In particular, I articulate four lines of argument to demonstrate that economists are provisionally justified in retaining a methodologically distinctive approach to the modelling of decision making. My first argument points to several evidential and epistemological concerns which complicate the interpretation of neural data and cast doubt on the inferences neuroeconomists often make in their studies. My second argument aims to show that the trade-offs between the modelling desiderata that neuroeconomists and other economists respectively value severely constrain the incorporation of neural insights into economic models. My third argument questions neuroeconomists’ attempts to develop a unified theory of choice behaviour by identifying some central issues on which they hold contrasting positions. My fourth argument differentiates various senses of the term ‘revolution’ and illustrates that neuroeconomists are unlikely to provide revolutionary contributions to economic theory in any of these senses. (shrink)

Is simulation some new kind of science? We argue that instead simulation fits smoothly into existing scientific practice, but does so in several importantly different ways. Simulations in general, and computer simulations in particular, ought to be understood as techniques which, like many scientific techniques, can be employed in the service of various and diverse epistemic goals. We focus our attentions on the way in which simulations can function as (i) explanatory and (ii) predictive tools. We argue that a wide (...) variety of simulations, both computational and physical, are best conceived in terms of a set of common features: initial or input conditions, a mechanism or set of rules, and a set of results or output conditions. Studying simulations in these terms yields a new understanding of their character as well as a body of normative recommendations for the care and feeding of scientific simulations. (shrink)

Esta obra se encuadra en la discusión ortodoxia-heterodoxia en economía, en el marco de la epistemología de la economía y dentro de la filosofía de la ciencia. El cuadro general es una discusión metodológica en términos de economía: si los modelos formales mainstream son o no, aquello que nos permite explicar, predecir, y/o alcanzar a comprender algo del mundo social. En este ámbito el texto de Fullbrook se enmarca en la llamada economía heterodoxa, apartándose de la economía mainstream, el dogmatismo (...) narrativo y el atomismo ontológico (Fullbrook, 2015 y 2016). (shrink)

Journal of Political Philosophy, EarlyView.

How is it possible that models from game theory, which are typically highly idealised, can be harnessed for designing institutions through which we interact? I argue that game theory assumes that social interactions have a specific structure, which is uncovered with the help of directed graphs. The graphs make explicit how game theory encodes counterfactual information in natural collections of its models and can therefore be used to track how model-interventions change model-outcomes. For model-interventions to inform real-world design requires the (...) truth of a causal hypothesis, namely that structural relations specified in a model approximate causal relations in the target interaction; or in other words, that the directed graph can be interpreted causally. In order to increase their confidence in this hypothesis, market designers complement their models with natural and laboratory experiments, and computational methods. Throughout the paper, the reform of a matching market for medical residents provides a case study for my proposed view, which hasn't been previously considered in the philosophy of science. (shrink)

The last decade and a half has seen an ardent development of self-organised criticality, a new approach to complex systems, which has become important in many domains of natural as well as social science, such as geology, biology, astronomy, and economics, to mention just a few. This has led many to adopt a generalist stance towards SOC, which is now repeatedly claimed to be a universal theory of complex behaviour. The aim of this paper is twofold. First, I provide a (...) brief and non-technical introduction to SOC. Second, I critically discuss the various bold claims that have been made in connection with it. Throughout, I will adopt a rather sober attitude and argue that some people have been too readily carried away by fancy contentions. My overall conclusion will be that none of these bold claims can be maintained. Nevertheless, stripped of exaggerated expectations and daring assertions, many SOC models are interesting vehicles for promising scientific research.Author Keywords: Self-organised criticality; Scaling law; Models; Formal analogy. (shrink)

Most papers in theoretical economics contain thought experiments. They take the form of more informal bits of reasoning that precede the presentation of the formal, mathematical models these papers are known for. These thought experiments differ from the formal models in various ways. In particular, they do not invoke the same idealized assumptions about the rationality, knowledge, and preferences of agents. The presence of thought experiments in papers that present formal models, and the fact that they differ from the formal (...) models in this way, is often ignored in debates on what, if anything, we can learn from formal models in theoretical economics. I show that paying due attention to thought experiments in theoretical economics has serious implications for this debate. Differences between thought experiments and formal models are especially problematic for Robert Sugden’s “credible worlds” account. (shrink)

Theoretical works in economics usually have a core consisting of proofs that a “model-economy” has certain properties. The economist constructs a model that can be looked on as a description of an economy, and then proves that certain relations hold in this economy and/or that certain relations in this economy depend on certain specific characteristics. The model-economy is usually described as simplified or idealized.

We claim that the process of theoretical model refinement in economics is best characterised as robustness analysis: the systematic examination of the robustness of modelling results with respect to particular modelling assumptions. We argue that this practise has epistemic value by extending William Wimsatt's account of robustness analysis as triangulation via independent means of determination. For economists robustness analysis is a crucial methodological strategy because their models are often based on idealisations and abstractions, and it is usually difficult to tell (...) which idealisations are truly harmful. (shrink)

John Cook Wilson (1849–1915) was Wykeham Professor of Logic at New College, Oxford and the founder of ‘Oxford Realism’, a philosophical movement that flourished at Oxford during the first decades of the 20th century. Although trained as a classicist and a mathematician, his most important contribution was to the theory of knowledge, where he argued that knowledge is factive and not definable in terms of belief, and he criticized ‘hybrid’ and ‘externalist’ accounts. He also argued for direct realism in perception, (...) criticizing both empiricism and idealism, and argued for a moderate nominalist view of universals as being in rebus and only ‘apprehended’ by their particulars. His influence helped swaying Oxford away from idealism and, through figures such as H. A. Prichard, Gilbert Ryle, or J. L. Austin, his ideas were also to some extent at the origin of ‘moral intuitionism’ and ‘ordinary language philosophy’ which defined much of Oxford philosophy until the second half of the twentieth-century. Nevertheless, his name and legacy were all but forgotten for generations after World War II. Still, his views on knowledge are with us today, being in part at work in the writings of philosophers as diverse as John McDowell, Charles Travis, and Timothy Williamson. (shrink)

This contribution sheds light on the role of infinite idealization in structural analysis, by exploring how infinite elements and finite element methods are combined in civil engineering models. This combination, I claim, should be read in terms of a ‘complementarity function’ through which the representational ideal of completeness is reached in engineering model-building. Taking a cue from Weisberg’s definition of multiple-model idealization, I highlight how infinite idealizations are primarily meant to contribute to the prediction of structural behavior in Multiphysics approaches.

Consistency of choice is a fundamental and recurring theme in decision theory, social choice theory, behavioral economics, and psychological sciences. The purpose of this paper is to study the consistency of choice independent of the particular decision model at hand. Consistency is viewed as an inherently logical concept that is fundamentally void of connotation and is thus disentangled from traditional rationality or consistency conditions imposed on decision models. The proposed formalization of consistency takes two forms: internal consistency, which refers to (...) the property that a choice model does not generate contradictory statements; and semantic consistency, which refers to the idea that a theory’s predictions are valid with respect to some observed data. In addressing semantic consistency, the relationship between theory and data is analyzed in terms of so-called duality mappings, which allow a passage between the two universes in a way that consistency is preserved. The formalization of consistency concepts relies on adapting the revealed preference theory to the context-dependent setting. The paper concludes by discussing the implications of the proposed framework and how it relates to classical revealed preference theory and other formalizations of the relationship between the theory and reality of choice. (shrink)

The thesis is a philosophical analysis of the consumption based capital asset pricing model, investigating in particular its epistemological and methodological foundations. Financial markets are integral parts of advanced and developing economies. They matter because they channel unspent household income into banks’ savings accounts and assets such as bonds and stocks. Financial economists have traditionally taken interest in the pricing mechanism that underlies this capital allocation. The consumption based capital asset pricing model is a prominent effort to describe, explain and (...) predict such prices. It tells a story of investors’ trade-off between consumption now and later and which portfolio of assets to hold. The CCAPM based narrative intuitively makes sense, and the chosen methodology involving theoretical assumption, mathematical models and empirical tests follows the professions’ standards of good scientific practise. But does CCAPM’s research programme provide knowledge for use? My thesis seeks to answer this question in a novel way. Instead of embarking on yet another asset pricing research project, I let Philosophy of Science inform my analysis. Following a “primer” introducing essential CCAPM topics and notations, I discuss, in turn, its theoretical foundation, mathematical model, and empirical test results from a philosophy of science perspective. I find that a few fundamental principles and several auxiliary assumptions combine to develop a simplified, partial and idealized theory of investors, financial markets and assets. The model reflects and represents this theory but also makes narrow claims that are distances away from the real situations they target. Unsurprisingly, ideal model assertions fail standard statistical tests of significance. I conclude that mathematical deductive modelling rooted in orthodox, a priori based fundamental principles create ideal and fictional settings that limit their scope and portability. The development of even more granular models within this orthodox paradigm that searches for “event regularities” will not render the desired knowledge for use. The real situations are possibly too complex to be captured in simplified assumptions, ideal theories and mathematical structures. Novel methodological and ontological approaches to asset pricing are in demand. Hence, claims about tendencies in the real data might replace the current focus on point-forecasts. (shrink)

All economic models involve abstractions and idealisations. Economic theory itself does not tell which idealizations are truly fatal or harmful for the result and which are not. This is why much of what is seen as theoretical contribution in economics is constituted by deriving familiar results from different modelling assumptions. If a modelling result is robust with respect to particular modelling assumptions, the empirical falsity of these particular assumptions does not provide grounds for criticizing the result. In this paper we (...) demonstrate how derivational robustness analysis does carry epistemic weight and answer criticism concerning its non-empirical nature and the problematic form of the required independence of the ways of derivation. The epistemic rationale and importance of robustness analysis also challenge some common conceptions of the role of theory in economics. (shrink)

John Stuart Mill regards economics as an inexact and separate science which employs a deductive method. This paper analyzes and restates Mill's views and considers whether they help one to understand philosophical peculiarities of contemporary microeconomic theory. The author concludes that it is philosophically enlightening to interpret microeconomics as an inexact and separate science, but that Mill's notion of a deductive method has only a little to contribute.

The aim of this paper is to develop ideas about robustness analyses. I introduce a form of robustness analysis that I call sufficient parameter robustness, which has been neglected in the literature. I claim that sufficient parameter robustness is different from derivational robustness, the focus of previous research. My purpose is not only to suggest a new taxonomy of robustness, but also to argue that previous authors have concentrated on a narrow sense of robustness analysis, which they have inadequately distinguished (...) from other investigations of models such as sensitivity analysis. (shrink)

Abstract Many of Boettke's criticisms of formalist economics are justified. However, he defines formalism so broadly that it becomes practically synonymous with mainstream economics, while his criticisms primarily target the sins of formalist economics more narrowly defined. And since he treats Austrian economics as the only viable alternative to mainstream economics, he incorrectly awards victory to Austrian economics. While Austrian economics has some valuable ideas to contribute to mainstream economics, it has serious deficiencies of its own.

In a broad brush, biological models are often constructed in two general types: as a concrete model; as an abstract model. A concrete model is a material model such as model organisms, while an abstract model is a mathematical or computational model consists of equations or algorithms. Though there are types of biological models that cannot be strictly categorized as either concrete or abstract, they are falling somewhere in between this spectrum. In view of the fact that biological phenomena are (...) sui generis and distinct from physical phenomena in many respects, using the concepts in standard modeling fails to account for the differences between biological sciences and physical sciences. Drawing from the resources of a credible-world account of models in economic modeling, I propose to reinterpret abstract models and concrete models in the light of the credible world account of models. (shrink)

In 1959, mathematician Mark Kac introduced a model, called the Kac ring, in order to elucidate the classical solution of Boltzmann to the problem of macroscopic irreversibility. However, the model is far from being a realistic representation of something. How can it be of any help here? In philosophy of science, it is often argued that models can provide explanations of the phenomenon they are said to approximate, in virtue of the truth they contain, and in spite of the idealisations (...) they are made of. On this view, idealisations are not supposed to contribute to any explaining, and should not affect the global representational function of the model. But the Kac ring is a toy model that is only made of idealisations, and is still used trustworthily to understand the treatment of irreversible phenomena in statistical mechanics. In the paper, my aim is to argue that each idealisation ingeniously designed by the mathematician maintains the representational function of the Kac ring with the general properties of macroscopic irreversibility under scrutiny. Such an active role of idealisations in the representing has so far been overlooked and reflects the art of modelling. (shrink)