Philosophy of the Social Sciences 38 (3):334-360 (2008)

Frank Hindriks
University of Groningen
Many models in economics are very unrealistic. At the same time, economists put a lot of effort into making their models more realistic. I argue that in many cases, including the Modigliani-Miller irrelevance theorem investigated in this paper, the purpose of this process of concretization is explanatory. When evaluated in combination with their assumptions, a highly unrealistic model may well be true. The purpose of relaxing an unrealistic assumption, then, need not be to move from a false model to a true one. Instead, it may be providing an explanation of some phenomenon by invoking the factor that figures in the assumption. This idea is developed in terms of the contrastive account of explanation. It is argued that economists use highly unrealistic assumptions to determine a contrast that is worth explaining. The process of concretization also motivates new explanatory questions. A high degree of explanatory power, then, may well be due to a high number of unrealistic assumptions. Thus, highly unrealistic models can be powerful explanatory engines. Key Words: concretization • explanation • explanatory power • idealization • model • Modigliani-Miller theorem • unrealistic assumption.
Keywords Models   Philosophy of Science   Explanation
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DOI 10.1177/0048393108319414
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References found in this work BETA

Nature's Capacities and Their Measurement.Nancy Cartwright - 1989 - Oxford, England: Oxford University Press.
The Scientific Image.William Demopoulos & Bas C. van Fraassen - 1982 - Philosophical Review 91 (4):603.
Explanation and Scientific Understanding.Michael Friedman - 1974 - Journal of Philosophy 71 (1):5-19.
Explanatory Unification.Philip Kitcher - 1981 - Philosophy of Science 48 (4):507-531.

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Citations of this work BETA

Economic Modelling as Robustness Analysis.Jaakko Kuorikoski, Aki Lehtinen & Caterina Marchionni - 2010 - British Journal for the Philosophy of Science 61 (3):541-567.
How Do Logics Explain?Nicole Wyatt & Gillman Payette - 2018 - Australasian Journal of Philosophy 96 (1):157-167.
Philosophy of Money and Finance.Boudewijn De Bruin, Lisa Maria Herzog, Martin O'Neill & Joakim Sandberg - 2018 - In Edward Zalta (ed.), Stanford Encyclopedia of Philosophy. Palo Alto: Metaphysics Research Lab, Stanford University.

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