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Why economic models do not give us explanations

Summary:
From Lars Syll Economic models frequently invoke … entities that do not exist, such as perfectly rational agents, perfectly inelastic demand functions, and so on. As economists often defensively point out, other sciences too invoke non-existent entities, such as the frictionless planes of high-school physics. But there is a crucial difference: the false-ontology models of physics and other sciences are empirically constrained. If a physics model leads to successful predictions and interventions, its false ontology can be forgiven, at least for instrumental purposes — but such successful prediction and intervention is necessary for that forgiveness … The idealizations of economic models, by contrast, have not earned their keep in this way. So the problem is not the idealizations in

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from Lars Syll

Why economic models do not give us explanationsEconomic models frequently invoke … entities that do not exist, such as perfectly rational agents, perfectly inelastic demand functions, and so on. As economists often defensively point out, other sciences too invoke non-existent entities, such as the frictionless planes of high-school physics. But there is a crucial difference: the false-ontology models of physics and other sciences are empirically constrained. If a physics model leads to successful predictions and interventions, its false ontology can be forgiven, at least for instrumental purposes — but such successful prediction and intervention is necessary for that forgiveness … The idealizations of economic models, by contrast, have not earned their keep in this way. So the problem is not the idealizations in themselves so much as the lack of empirical success they buy us in exchange. As long as this problem remains, claims of explanatory credit will be unwarranted.

A. Alexandrova & R. Northcott

About Lars Syll
Lars Syll
Lars Jörgen Pålsson Syll (born November 5, 1957) is a Swedish economist who is a Professor of Social Studies and Associate professor of Economic History at Malmö University College. Pålsson Syll has been a prominent contributor to the economic debate in Sweden over the global financial crisis that began in 2008.

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