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Economic Models as Analogies

32 Pages Posted: 4 Jan 2012  

Itzhak Gilboa

Tel Aviv University - Eitan Berglas School of Economics; HEC Paris - Economics & Decision Sciences

Andrew Postlewaite

University of Pennsylvania - Department of Economics

Larry Samuelson

Yale University - Department of Economics; Yale University - Cowles Foundation

David Schmeidler

Tel Aviv University

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2011

Abstract

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 some complexity arguments that explain why case-based reasoning may sometimes be the method of choice; why economists prefer simple examples; and why a paradigm may be useful even if it does not produce theories.

Keywords: Methodology, Case-based reasoning

JEL Classification: B40, B41

Suggested Citation

Gilboa, Itzhak and Postlewaite, Andrew and Samuelson, Larry and Schmeidler, David, Economic Models as Analogies (December 27, 2011). PIER Working Paper No. 12-001. Available at SSRN: https://ssrn.com/abstract=1979472 or http://dx.doi.org/10.2139/ssrn.1979472

Itzhak Gilboa

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-6423 (Phone)
972-3-640-9908 (Fax)

HEC Paris - Economics & Decision Sciences

Paris
France

Andrew Postlewaite (Contact Author)

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7350 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~apostlew

Larry Samuelson

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

David Schmeidler

Tel Aviv University ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972-3-640-9643 (Phone)
+972-3-640-9357 (Fax)

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