Credible worlds: the status of theoretical models in economics

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.
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DOI 10.1080/135017800362220
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References found in this work BETA
Mary S. Morgan (2001). Models, Stories and the Economic World. Journal of Economic Methodology 8 (3):361-384.

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Citations of this work BETA
Roman Frigg (2010). Models and Fiction. Synthese 172 (2):251 - 268.
Julian Reiss (2012). The Explanation Paradox. Journal of Economic Methodology 19 (1):43-62.

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