How Economists Model the World into Numbers

“…The internal principles of a model may appear to be robust generalization, but they may be inexact and inaccurate due to disturbing factors. Boumans (2005) however argues that the inexact and inaccurate relations can be transformed into exact and accurate relationships by calibration and in doing so make the model suitable as a measuring device. In this way, the problem of lack of control over disturbing factors can be circumvented.…”

Section: Models As Measuring Instruments?mentioning

confidence: 99%

Models as measuring instruments: measurement of duration dependence of unemployment

Rodenburg¹

2005

Journal of Economic Methodology

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Nancy Cartwright views models as blueprints for nomological machines -machines that, if properly shielded, generate law-like behaviour or regularities. Marcel Boumans has argued that we can look for devices inside models, which enable us to measure aspects of these regularities. Therefore, if models do produce regular behaviour (Cartwright), they might perhaps generate numbers about phenomena in the world, provided we can locate a good measuring device in the model (Boumans). How do they do this? Models are often understood to consist of internal principles and bridge principles. Both of these play a role in the measuring process. This paper suggests that we can understand the internal principles to be responsible for generating the regularities displayed by the model -and for many users of the model, this is sufficient use. The bridge principles (following Cartwright -'the real bridge principles') are a matter of picking the right mathematical representation to make the model work with respect to some real world case at hand. These 'real' bridge principles may enable the model to generate numbers and so serve to make the model into a measuring device. This paper explores this construction of a measuring device of duration dependence of unemployment. Since search theory cannot be made operational for this purpose duration models, which model of the outflow process of unemployment with a Weibull function, are taken as a representation of reservation wage setting in search models. As I show, this Weibull function serves as a bridge principle to make a measure of the elasticity of response between unemployment benefit and duration of unemployment. It enables measurement to take place by modelling behaviour according to some assumptions, which operate as constraints. While this Weibull function serves this purpose, its assumptions are arbitrary rather than connected to theory, and measurements generated with this bridge principle turn out to be highly sensitive to its specification. The Weibull function does enable the model to function as a measuring device, but the lack of ability to make newly invoked unobservable variables operational makes it of dubious worth.

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“…So, such models are constructed using the rules of ceteris absentibus, ceteris neglictis, and ceteris paribus (Boumans 2005). In Mäki's account, a model builder is sealing-off the relations of interest from other influences in order to isolate the essence of the object (Mäki 1992, p. 344).…”

Section: Introductionmentioning

confidence: 99%

Between Isolations and Constructions: Economic Models as Believable Worlds

Hardt

2017

Economics Without Laws

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ABSTRACT. As the title of this essay suggests, my concern is with the issue of what are economic models. However, the goal of the paper is not to offer an in-depth study on multiple approaches to modelling in economics, but rather to overcome the dichotomical divide between conceptualizing models as isolations and constructions. This is done by introducing the idea of economic models as believable worlds, precisely descriptions of mechanisms that refer to the essentials of the modelled targets. In doing so I make use of the Woodward's (2002) conceptualization of mechanisms. It is shown that such models do not offer the perfectly true descriptions of the actual world but justified beliefs about the modelled, precisely they aim at maximizing truth and minimizing falsity in a large body of belief about the real world. The analysis throughout the paper is supported by in-depth examination of the Varian's (1980) model of sales that is here treated as a representative way of reasoning in neoclassical economics.

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How Economists Model the World into Numbers

Cited by 114 publications

References 22 publications

Historical Trajectories of the Financial Sector Display in the System of National Accounts

Historical Trajectories of the Financial Sector Display in the System of National Accounts

Models as measuring instruments: measurement of duration dependence of unemployment

Between Isolations and Constructions: Economic Models as Believable Worlds

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