Economic Models as Analogies, Third Version
Tel Aviv University - Eitan Berglas School of Economics; HEC Paris - Economics & Decision Sciences
University of Pennsylvania - Department of Economics
Yale University - Department of Economics
Tel Aviv University; Interdisciplinary Center (IDC) Herzliyah; Ohio State University (OSU)
January 27, 2013
PIER Working Paper No. 13-007
People often wonder why economists analyze models whose assumptions are known to be false, while economists feel that they learn a great deal from such exercises. We suggest that part of the knowledge generated by academic economists is case-based rather than rule-based. That is, instead of offering general rules or theories that should be contrasted with data, economists often analyze models that are \theoretical cases", which help understand economic problems by drawing analogies between the model and the problem. According to this view, economic models, empirical data, experimental results and other sources of knowledge are all on equal footing, that is, they all provide cases to which a given problem can be compared. We offer complexity arguments that explain why case-based reasoning may sometimes be the method of choice and why economists prefer simple cases.
Number of Pages in PDF File: 43
Keywords: Methodology, Case-based reasoning
JEL Classification: B40, B41
Date posted: January 30, 2013
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