This paper analyses and explicates the explanatory characteristics of Schelling's checkerboard model of segregation. It argues that the explanation of emergence of segregation which is based on the checkerboard model is a partial potential (theoretical) explanation. Yet it is also argued that despite its partiality, the checkerboard model is valuable because it improves our chances to provide better explanations of particular exemplifications of residential segregation. The paper establishes this argument by way of examining the several ways in which the checkerboard (...) model has been explored in the literature. The examination of the checkerboard model also supports the view that the relation between the real world and models is complex, and models should be considered as mediators, or as instruments of investigation. (shrink)

This paper responds to the argument, made by many heterodox economists, that equilibrium theory should be abandoned in favor of theories that pay more attention to history. It considers some of the main ways in which the concept of equilibrium has been understood in economics, and the reasons why there has been confusion in discussions of equilibrium. The conclusion is drawn that the focus should be less on equilibrium as a concept than on equilibrium analysis as a method, and limited (...) defense of this method is offered. (shrink)

Methodology of scientific research programs (MSRP), model-building and actor-network-theory (ANT) are woven together to provide a layered study of the Leontief paradox. Neil De Marchi's Lakatosian account examined the paradox within an Ohlin-Samuelson research program. A model-building approach rather highlights the ability of Leontief's input-output model to mediate between international trade theory and the world by facilitating an empirical application of the Heckscher-Ohlin Theorem. The epistemological implications of this model-building approach provide an alternative explanation of why Samuelson and other prominent (...) economists ignored the paradox. By focusing on the network in which input-output analysis evolved, Bruno Latour's ANT further explains the response of international trade theorists. (shrink)

There are at least two elements of theory completion necessary for measurement: (1) a measurement formula and (2) standardization of that representation. Standardization is based on the search for stability. The more stable the correlation which the measurement formula represents is, the less influence other circumstances have. Then, the interconnection between testing, mathematical representation and standardization is of a hierarchical order. By testing a model one tries to find out to what extent the model covers the data of the phenomenon, (...) while to be a candidate for a measurement formula the model must represent the whole data range. And among the possible representations the standard model represents the most stable correlation under different circumstances. Lucas? model of the Phillips curve has been used to investigate this interconnection between testing, representation and stability. (shrink)

In several accounts of what models are and how they function a specific view dominates. This view contains the following characteristics. First, there is a clear-cut distinction between theories, models and data and secondly, empirical assessment takes place after the model is built. This view in which discovery and justification are disconnected is not in accordance with several practices of mathematical business-cycle model building. What these practices show is that models have to meet implicit criteria of adequacy, such as satisfying (...) theoretical, mathematical and statistical requirements, and be useful for policy. In order to be adequate, models have to integrate enough items to satisfy such criteria. These items include besides theoretical notions, policy views, mathematisations of the cycle and metaphors also empirical data and facts. So, the main thesis of this chapter is that the context of discovery is the successful integration of those items that satisfy the criteria of adequacy. Because certain items are empirical data and facts, justification can be built-in. (shrink)

The assessment of models in an experiment depends on their material nature and their function in the experiment. Models that are used to make the phenomenon under investigation visible - sensors - are assessed by calibration. However, calibration strategies assume material intervention. The experiment discssed in this paper is an experiment in economics to measure the influence of technology shocks on business cycles. It uses immaterial, mathematical instruments. It appears that calibration did not work for these kinds of models, it (...) did not provide reliable evidence for the facts of the business cycle. (shrink)

In economics, models are built to answer specific questions. Each type of question requires its own type of models; in other words, it defines the requirements that a model should meet and thereby instructs how the models should be built. An explanation is an answer to a ‘why’-question. In economics, this answer is provided by a white-box model. To answer a ‘how much’-question, which is asking for a measurement, economists can make use of black-box models. Economic phenomena are often (...) so complex that white-box models that should function as explanations for them appear not to be intelligible. So, for questions concerning understanding - e.g. ‘Can you clarify this phenomenon‘’ ‘Can you tell me what would happen if‘’ - it would appear that grey-box models are more adequate. This implies a twofold revision of de Regt and Dieks’s (2005) criteria for understanding phenomena. First, whenever the term ‘theory’ is used it should be substituted by ‘model’. Secondly, the Criterion for the Intelligibility of Models (CIM) is now simplified as: ‘A model M is intelligible for economists (in context C) if they have built M as a grey-box construction’. A grey-box construction implies that they ‘can recognize qualitatively characteristic consequences of M without performing exact calculations’. (shrink)

The Representational Theory of Measurement conceives measurement as establishing homomorphisms from empirical relational structures into numerical relation structures, called models. There are two different approaches to deal with the justification of a model: an axiomatic and an empirical approach. The axiomatic approach verifies whether a given relational structure satisfies certain axioms to secure homomorphic mapping. The empirical approach conceives models to function as measuring instruments by transferring observations of an economic system into quantitative facts about that system. These facts are (...) evaluated by their accuracy and precision. Precision is achieved by least squares methods and accuracy by calibration. For calibration standards are needed. Then two strategies can be distinguished. One aims at estimating the invariant (structural) equations of the system. The other strategy is to use known stable facts about the system to adjust the model parameters. For this strategy, the requirement of models as homomorphic mappings has been dropped. (shrink)

Halfway through the 1930s, a new practice was born that was based on instruments called 'models'. This practice is characterized by building and applying empirical models, i.e. representations of (aspects of) the world. The aim of this chapter is to explore these kinds of representations.

The book reveals different dimensions of modeling in the historical sciences. Papers collected in the first part (Ontology of the Historical Process) consider different models of historical reality and discuss their status. The second part (Modeling in the Methodology of History) presents various forms of idealization in historiographic research. The papers in the third part (Modeling in the Research Practice) present various models of past reality (e.g. of Poland, Central Europe and the general history of the feudal system) put forward (...) by historians. Other papers consider the status of scientific laws and historical generalizations. The volume will be of interest to those who study analytical philosophy of history, methodology of history and social sciences, social philosophy as well as theory and history of historiography. (shrink)

Understanding the factors determining economic growth has been a major concern for economists and governing bodies for many years. The Solow growth model and the endogenous growth models are the main theories tested and used in the growth literature. This paper discusses the main contributions to economic methodology and uses Lakatos's scientific research program framework to evaluate the main theoretical contributions to growth theory. Based on Lakatos's ideas, Solovian models are both empirically and theoretically progressive. Endogenous growth models, on the (...) other hand, are not empirically corroborated, and thus not progressive in Lakatosian sense. However, there are many reasons for rational growth economists to continue working in this field, even facing empirical refutations of an important theoretical prediction. Endogenous growth models are promising in terms of generating enormous gains that will help us better understand the mechanisms of economic growth. (shrink)

By using a metatheoretical interpretation of the development of international trade theory as an example, I illustrate that, as is manifested in the practices of economic theorization, a theoretical representation can be decomposed into two component representations: a formal representation and a causal narrative representation. I further maintain that, with respect to both component representations, the concern of isomorphism is important in that it is the guiding idea that underlies economists' practice of identifying both an adequate formal model and a (...) plausible causal story to represent the targeted phenomenon. As a result, it can be argued that the nature of the representational relation is manifested in the practices of economists as they imagine the imaginable causal stories on the basis of imaginative causal structures depicted in the causal models of the targeted phenomenon. (shrink)

This paper distinguishes the base domain of an economic theory (in which predictions are relatively unambiguous) from, respectively, the domains of intended application and of legitimate testing; it argues that the domain of legitimate testing is not generally restricted to that of intended application; and discusses the obligations on researchers imposed by a position that presumes experimental environments in the base domain of a theory to provide legitimate test, unless there is compelling reason to expect behaviour in the domain of (...) intended application to conform more closely to the theory. Experimental tests of choice theory are discussed as an example. (shrink)

The paper argues that the Nash Equilibrium Refinement Programme in game theory was less successful than its competitor, the Epistemic Programme (Interactive Epistemology). The prime criterion of success is the extent to which the programmes were able to reach the key objective guiding non-cooperative game theory for much of the 20th century, namely, to develop a complete characterisation of the strategic rationality of economic agents in the form of the ultimate game theoretic solution concept for any normal form and extensive (...) game. The paper explains this in terms of unjustified degrees of mathematisation in the Nash Equilibrium Refinement Programme. While this programme's mathematical models were often inspired by purely mathematical concerns rather than the economic phenomena they were intended to be mathematical models of, the Epistemic Programme's mathematical models were developed with a keen eye to the role beliefs and desires play in strategic interaction between rational economic agents playing games; that is, their Interactive Epistemology. The Epistemic Programme succeeded in developing mathematical models formalising aspects of strategic interaction that remained implicit in the Nash Equilibrium Refinement Programme due to an unjustified degree of mathematisation. As a result, the Epistemic Programme is more successful in game theory . (shrink)

I argue that game theoretic explanations of human actions make implausible epistemological assumptions. A logical analysis of game theoretic explanations shows that they do not conform to the belief-desire framework of action explanation. Epistemic characterization theorems (specifying sufficient conditions for game theoretic solution concepts to obtain) are argued to be the canonical way to make game theory conform to that framework. The belief formation practices implicit in epistemic characterization theorems, however, disregard all information about players except what can be found (...) in the game itself. And such a practice of belief formation is, I show, implausible. (shrink)

Monetary authorities have been implicated in the financial crisis of 2007?2008. John Muellbauer, for example, has blamed what he thought was initially inadequate policy responses by central banks to the crisis on their models, which are, in his words, ?overdue for the scrap heap?. This paper investigates the role of monetary policy models in the crisis and finds that (i) it is likely that monetary policy contributed to the financial crisis; and (ii) that an inappropriately narrow suite of models made (...) this mistake easier. The core models currently used at prominent central banks were not designed to discover emergent financial fragility. In that respect John Muellbauer is right. But the implications drawn here are less dramatic than his: while the representative agent approach to micro-foundations now seems indefensible, other aspects of modern macroeconomics are not similarly suspect. The case made here is rather for expanding the suite of models used in the regular deliberations of monetary authorities, with new models that give explicit roles to the financial sector, to money and to the process of exchange. Recommending a suite of models for policy making entails no methodological innovation. That is what central banks do; though, of course, how they do it is open to improvement. The methodological innovation is the inclusion of a model that would be sensitive to financial fragility, a sensitivity that was absent in the run-up to the current financial crisis. (shrink)

Models treating the simple properties of social groups have a common shortcoming. Typically, they focus on the local properties of group members and the features of the world with which group members interact. I consider economic models of bureaucratic corruption, to show that (a) simple properties of groups are often constituted by the properties of the wider population, and (b) even sophisticated models are commonly inadequate to account for many simple social properties. Adequate models and social policies must treat certain (...) factors that are not local to individual members of the group, even if those factors are not causally connected to those individuals. Key Words: individualism • corruption • supervenience • model • cause. (shrink)

Is there more to ?good science? than explaining novel facts? Social interaction within scientific communities plays a pivotal role in defining acceptable research practices. This article explores the connection between research outcomes and the socio-cultural environment they are constructed in by developing an agent-based computational model of scientific communities. Agent-to-agent interaction is added to a system of knowledge production inspired by the work of Lakatos (1969, 1970) on scientific research programs as an important factor guiding the actions of (...) researchers. Simulation results show that early in scientific inquiry, when there are new phenomena to explain, the research community is fragmented and scientists prefer to rely on their own talents (innovation) in conducting research. Over time, consensus emerges in the form of a dominate research program which utilizes a mixture of past and concurrent approaches (adaptation). This result illustrates Kuhn's (1970) notion of the rise and fall of scientific paradigms. (shrink)

Does empirical work in economics both provoke and test theoretical models, or does model development proceed according to a theory-oriented research program, with little interaction with empirics? Robert Solow and Richard Lipsey have articulated different visions of this relationship. This paper: (i) describes these competing Solow versus Lipsey views; (ii) presents examples illustrating each view; and (iii) draws inferences about factors promoting a close relation between empirics and modeling. Three examples are examined in detail: the ?nursing shortage? literature; Lind's analysis (...) of recent rent control models; and a wide-ranging evaluation of ?is there too little theory in development economics?? by leading development economists. Various factors promoting or inhibiting a close connection between modeling and empirics are identified. (shrink)

Game?theoretic models consist of a formal game structure and an informal model narrative or story. When game theory is employed to model economic situations, the stories play a central role in interpreting, constructing and solving game structures. We analyse the architecture of game theory and distinguish between game models and the theory proper. We present the different functions of the model narrative in the application of game models to economic situations. In particular, we show how model narratives support the choice (...) of solution concepts defined and provided by the theory proper. We further argue that the narrative's role in interpretation, construction and solution makes it a necessary part of a game model that is intended to be a model of an economic situation. We conclude that game theory is not a universal theory of rationality, but only offers tools to model specific situations at varying degrees and kinds of rationality. (shrink)

External validity is the problem of generalizing results from laboratory to non?laboratory conditions. In this paper we review various ways in which the problem can be tackled, depending on the kind of experiment one is doing. Using a concrete example, we highlight in particular the distinction between external validity and robustness, and point out that many experiments are not aimed at a well?specified real?world target but rather contribute to a ?library of robust phenomena?, a body of experimental knowledge to be (...) applied case by case. (shrink)

Explanatory economic analysis of the common law has long been subject to deep philosophical skepticism for two reasons. First, common law decisions appear to be cast in the language of deontic morality, not the consequentialist language of efficiency. For this reason, philosophers have claimed that explanatory economic analysis cannot satisfy the transparency criterion, which holds that a legal theory's explanation must provide a plausible account of the relationship between the reasoning it claims judges actually use to decide cases and the (...) express reasoning judges provide in their opinions. Philosophers have doubted that the economic analysis has a plausible account of why judges would use deontic moral terms to explain cases they decide using consequentialist economic reasoning, arguing instead that only a deontic moral account of judicial reasoning can be squared with the judicial use of deontic moral language. Second, the common law has a bilateral structure, in which a plaintiff's right to recover and a defendant's duty to compensate are treated as correlative. Philosophers have observed that this structure seems custom tailored to retrospective moral rights adjudication and ill suited to prospective efficient regulation. Recently, two philosophers, Jules L. Coleman and Stephen A. Smith, have developed these ideas into a full-scale assault on the explanatory credentials of the economic analysis. I defend the economic analysis by arguing that the bilateral structure of the common law either constitutes a "second best" approach to providing incentives for efficient behavior, as economic analysts have maintained, or that it is the vestigial remnant of the common law's originally deontic conception. I also claim that the economic analysis satisfies the transparency criterion by arguing that terms with a deontic plain meaning have acquired a consequentialist contextual meaning within the common law. Although this "contextualist convergence" thesis is counterintuitive, I build on Coleman's semantic theory to explain how it is possible. To demonstrate that it is plausible as well, I argue that evolutionary forces would have naturally led to this result over the course of the common law's development. In particular, I claim that the substantial indeterminacy of deontic moral theory, and the superior determinacy of the economic analysis, explains why judges would be intuitively attracted to reasoning that is best reconstructed in economic terms, notwithstanding the superior normative force of deontic moral theory. Thus, the core of my defense of explanatory economic analysis is that its critics overlook the central theoretical and practical role determinacy plays in explanation and justification generally, and in the explanation of judicial reasoning in particular, where determinacy is prized, if not above all else, no less than any other virtue. (shrink)

This volume presents mathematical game theory as an interface between logic and philosophy.

A long-standing tradition presents economic activity in terms of the flow of fluids. This metaphor lies behind a small but influential practice of hydraulic modelling in economics. Yet turning the metaphor into a three-dimensional hydraulic model of the economic system entails making numerous and detailed commitments about the analogy between hydraulics and the economy. The most famous 3-D model in economics is probably the Phillips machine, the central object of this paper.

Biologists and economists use models to study complex systems. This similarity between these disciplines has led to an interesting development: the borrowing of various components of model-based theorizing between the two domains. A major recent example of this strategy is economists’ utilization of the resources of evolutionary biology in order to construct models of economic systems. This general strategy has come to be called evolutionary economics and has been a source of much debate among economists. Although philosophers have developed literatures (...) on the nature of models and modeling, the unique issues surrounding this kind of interdisciplinary model building have yet to be independently investigated. In this paper, we utilize evolutionary economics as a case study in the investigation of more general issues concerning interdisciplinary modeling. We begin by critiquing the distinctions currently used within the evolutionary economics literature and propose an alternative carving of the conceptual terrain. We then argue that the three types of evolutionary economics we distinguish capture distinctions that will be important whenever resources of model-based theorizing are borrowed across distinct scientific domains. Our analysis of these model-building strategies identifies several of the unique methodological and philosophical issues that confront interdisciplinary modeling. (shrink)

This paper asks how, in science in general and in economics in particular, theoretical models aid the understanding of real-world phenomena. Using specific models in economics and biology as test cases, it considers three alternative answers: that models are tools for isolating the ‘capacities’ of causal factors in the real world; that modelling is ‘conceptual exploration’ which ultimately contributes to the development of genuinely explanatory theories; and that models are credible counterfactual worlds from which inductive inferences can be made. The (...) paper argues that the ‘credible worlds’ account captures significant aspects of scientific practice, even if many modellers see their work as conceptual exploration. (shrink)