32 Pages Posted: 4 Jan 2012
Date Written: December 27, 2011
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: 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