A Brief Epistemology of Economic Models. A Short Essay in Philosophy of Science

Abstract

This paper attempts to construct a short epistemology of economic models by using as a benchmark a comparison between the methodological issues of contemporary physics and of economics. In particular, the paper focuses on the role of indeterminacy in either sciences. Herein the general claim is that the models of economics fail at dealing with uncertainty as effectively as the models of natural sciences because economists did not manage to overcome the identification problem that is peculiar to economics. In this respect, the paper shows that the models of economics assume an untenable determinism that derives from the notion of rationality of agents. The paper is divided in three sections: the first section deals with the issues related to assumptions in the models of physics and economics; the second section deals with the problem of uncertainty in quantum mechanics and in economics; the third section deals with the problem of causality in both sciences. Eventually, the paper concludes that several methodological problems affect the efficiency of economic models. Most importantly, the paper finds that economic models abstract too much from the reality and, thus, do not provide deep investigations of agents’ discrete choices. This is shown to affect the consistency of models and their explanatory power.