Credible worlds: the status of theoretical models in economics
- 1 January 2000
- journal article
- research article
- Published by Informa UK Limited in Journal of Economic Methodology
- Vol. 7 (1), 1-31
- https://doi.org/10.1080/135017800362220
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.Keywords
This publication has 2 references indexed in Scilit:
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- A Treatise of Human NaturePublished by Oxford University Press (OUP) ,1739