Infinite Idealizations and Approximate Explanations in Economics

Max Albert and Hartmut Kliemt ()
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Hartmut Kliemt: University of Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: If we take it that, at least in the social sciences, “realistic” implies “finite”, then countless economic models involving infinitary assumptions must obviously be classified as unrealistic—for example, models with infinitely divisible goods, a continuum of traders, consumers optimizing over an infinite time horizon, or players optimizing over an infinite number of interactions. We argue that unrealistic models involving infinities can, in principle, supply explanations in economics. We develop a concept of approximate explanation based on the “method of decreasing abstraction”, that is, the practice of approximating complex situations through a sequence of increasingly realistic models. Our account of approximate explanation renders the testing view of economic science compatible with scientific realism. However, compatibility does not extend to the folk theorems for infinitely repeated games, which are used widely in applied economics (e.g., in industrial economics) and beyond (e.g., spontaneous emergence of social order). Explanations based on these theorems are rejected by our criterion.

Keywords: Approximate explanation; Folk theorems of game theory; Infinite idealizations; Method of decreasing abstraction; Methodology of economics; Unrealistic assumptions (search for similar items in EconPapers)
JEL-codes: B40 B41 C73 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017
New Economics Papers: this item is included in nep-hpe and nep-ore
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201726

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