Non-causal understanding with economic models: the case of general equilibrium

Abstract

How can we use models to understand real phenomena if models misrepresent the very phenomena we seek to understand? Some accounts suggest that models may afford understanding by providing causal knowledge about phenomena via how-possibly explanations. However, general equilibrium models, for example, pose a challenge to this solution since their contribution appears to be purely mathematical results. Despite this, practitioners widely acknowledge that it improves our understanding of the world. I argue that the Arrow-Debreu model provides a mathematical how-possibly explanation which establishes claims of mathematical dependence. The account developed reveals how mathematical knowledge can inform claims about the world, allow 'what-if-things-had-been-different' inferences, and thus improve our understanding.

How-possibly explanations in economics: anything goes?

“…may provide understanding (e.g. Bokulich, 2016;Kuorikoski & Ylikoski, 2015;Rice, 2016;Verreault-Julien, 2017Ylikoski & Emrah Aydinonat, 2014).…”

“…(Hands, 2016, p. 38, emphasis in original) In other words, we could say that for Hands a perfectly competitive economy is epistemically impossible, but objectively possible. What general equilibrium models do is to explain how that objectively possible world could come about (see also Verreault-Julien, 2017). Critically, according to Hands it was not an exercise in pure mathematics because many assumptions had an 'economic interpretation', i.e.…”

“…Instead, they have argued that many scientific modelling efforts aim not at how-actually explanations (HAEs) but at how-possibly explanations (HPEs) (Aydinonat, 2007(Aydinonat, , 2018Aydinonat & Köksal, 2019;Basso et al, 2017;Grüne-Yanoff, 2013a, 2013bKuorikoski & Ylikoski, 2015;Mäki, 2009;Reiss, 2008, ch. 6;Rohwer & Rice, 2013;Verreault-Julien, 2017;Weisberg, 2013, ch. 7;Ylikoski & Emrah Aydinonat, 2014).…”

The epistemology of modal modeling

“…Philosophers disagree on how HPE practices are to be characterized, but most parties appear to agree that (i) models play a crucial role in supporting HPEs; and (ii) offering an HPE involves making some form of modal claim (see e.g. Bokulich, 2014; Grüne‐Yanoff, 2009; 2013; Reutlinger et al., 2018; Verreault‐Julien, 2017; 2019; Weisberg, 2013, chapter 7). That is, a possibility claim is made on the basis of a model result.…”

Understanding does not depend on (causal) explanation

“…Similarly, I would like to show that one important source of knowledge conducive to understanding phenomena is studied in the philosophy of science literature under the label of ‘how-possibly explanations’ (Bokulich 2014; Craver 2006; Forber 2010; Grüne-Yanoff 2013a, 2013b; Rohwer and Rice 2013; Verreault-Julien 2017, 2018; Ylikoski and Aydinonat 2014). How-possibly explanations (HPEs hereafter) are to be contrasted with how-actually explanations (HAEs hereafter), or explanations simpliciter.…”