by The vanity of deductivity Modelling by the construction of analogue economies is a widespread technique in economic theory nowadays … As Lucas urges, the important point about analogue economies is that everything is known about them … and within them the propositions we are interested in ‘can be formulated rigorously and shown to be valid’ … For these constructed economies, our views about what will happen are ‘statements of verifiable fact.’ The method of verification is deduction … We are however, faced with a trade-off: we can have totally verifiable results but only about economies that are not real … How then do these analogue economies relate to the real economies that we are supposed to be theorizing about? … My overall suspicion is that the way
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The vanity of deductivity
Modelling by the construction of analogue economies is a widespread technique in economic theory nowadays … As Lucas urges, the important point about analogue economies is that everything is known about them … and within them the propositions we are interested in ‘can be formulated rigorously and shown to be valid’ … For these constructed economies, our views about what will happen are ‘statements of verifiable fact.’
The method of verification is deduction … We are however, faced with a trade-off: we can have totally verifiable results but only about economies that are not real …
How then do these analogue economies relate to the real economies that we are supposed to be theorizing about? … My overall suspicion is that the way deductivity is achieved in economic models may undermine the possibility … to teach genuine truths about empirical reality.