Are all models wrong?
from Lars Syll
The more interesting discussion is the one about the definition of truth. The philosopher Bertrand Russell has written something on truth about a century ago in his book The Problems of Philosophy (ch. XII):
“It will be seen that minds do not create truth or falsehood. They create beliefs, but when once the beliefs are created, the mind cannot make them true or false, except in the special case where they concern future things which are within the power of the person believing, such as catching trains. What makes a belief true is a fact, and this fact does not (except in exceptional cases) in any way involve the mind of the person who has the belief.”
Truth, Russell says, is correspondence with facts. If minds do not create truth or falsehood, but only beliefs, then I would argue that models are beliefs. They can be true when they correspond to the facts. So, there is hope! Models can be right after all! … A model is an abstraction, but as such it can be right. Of course, there is no proof that a model that has been right today will be right tomorrow, but that only makes economics an art.
Interesting reading that — once again — shows that being able to model and investigate a credible world, a world that somehow could be considered real or similar to the real world, is not the same as investigating the real world. Even though all models are false, since they simplify, they may still possibly serve our pursuit of truth. But then they cannot be unrealistic or false in any way. The falsehood or unrealisticness has to be qualified (in terms of resemblance, relevance, etc.). At the very least, the minimalist demand on models in terms of credibility has to give away to a stronger epistemic demand of appropriate similarity and plausibility.
The predominant strategy in ‘modern’ economics is to build models and make things happen in these “analogue-economy models” rather than engineering things happening in real economies. And as a rule the modelers consider their work done when they have been able to convince themselves that the model is valid. But — really — to have valid evidence is not enough. What economics needs is sound evidence. Why? Simply because the premises of a valid argument do not have to be true, but a sound argument, on the other hand, is not only valid, but builds on premises that are true. Aiming only for validity, without soundness, is setting the economics aspirations level too low for developing a realist and relevant science.