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Computing the Perfect Model: Why Do Economists Shun Simulation?

Published online by Cambridge University Press:  01 January 2022

Abstract

Like other mathematically intensive sciences, economics is becoming increasingly computerized. Despite the extent of the computation, however, there is very little true simulation. Simple computation is a form of theory articulation, whereas true simulation is analogous to an experimental procedure. Successful computation is faithful to an underlying mathematical model, whereas successful simulation directly mimics a process or a system. The computer is seen as a legitimate tool in economics only when traditional analytical solutions cannot be derived, i.e., only as a purely computational aid. We argue that true simulation is seldom practiced because it does not fit the conception of understanding inherent in mainstream economics. According to this conception, understanding is constituted by analytical derivation from a set of fundamental economic axioms. We articulate this conception using the concept of economists' perfect model. Since the deductive links between the assumptions and the consequences are not transparent in ‘bottom-up’ generative microsimulations, microsimulations cannot correspond to the perfect model and economists do not therefore consider them viable candidates for generating theories that enhance economic understanding.

Type
Research Article
Copyright
Copyright © The Philosophy of Science Association

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Footnotes

Previous versions of this paper have been presented at Philosophical Perspectives on Scientific Understanding in Amsterdam and at ECAP 05 in Lisbon. The authors would like to thank Tarja Knuuttila, Erika Mattila, Jani Raerinne, and Petri Ylikoski for helpful comments and Joan Nordlund for correcting the language. Jaakko Kuorikoski would also like to thank the Finnish Cultural Foundation for support of this research.

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