Year: 2012
Type: article
Abstract: Strangely perhaps, the most obvious element in the inference gap for models ... lies in the validity of any inference between two such different media -forward from the real world to the artificial world of the mathematical model and back again from the model experiment to the real material of the economic world.The model is at most a parallel world.The parallel quality does not seem to bother economists.But materials do matter: it matters that economic models are only representations of things in the economy, not the things themselves. Mary Morgan: The World in the ModelKeynes, genuine uncertainty and ergodicity REH basically says that people on the average hold expectations that will be fulfilled.This makes the economist's analysis enormously simplistic, since it means that the model used by the economist is the same as the one people use to make decisions and forecasts of the future.This view is in obvious ways very different to the one we connect with John Maynard Keynes.According to Keynes (1937:113) we live in a world permeated by unmeasurable uncertaintynot quantifiable stochastic risk -which often force us to make decisions based on anything but rational expectations.Sometimes we "simply do not know."Keynes would not have accepted Muth's view that expectations "tend to be distributed, for the same information set, about the prediction of the theory."Keynes, rather, thinks that we base
Author: Lars Pålsson Syll
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2129484031