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Economic Model vesus Imaginary Constructs

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Economic Model vesus Imaginary Constructs

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Solid_Choke posted on Thu, Jul 29 2010 11:17 PM

So, I'm reading through Human Action and keep encountering the use of "imaginary constructs", such as the evenly rotating economy and the socialist commonwealth. Why do modern (amatuer) Austrians Economists argue against the model building of the Neo Classical School, when Mises himself seemed to use models for understanding economic theory? What exactly is the difference (if there is one) between economic models and imaginary contructs?

"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay

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Answered (Verified) Jon Irenicus replied on Thu, Jul 29 2010 11:40 PM
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The "models" are solely for conceptual clarification, e.g. differentiating interest from profit from money. They're not predictive devices. Austrianism opposes trying to build economic theory out of predictive models and using mathematical language when ordinary language would do the job just as well (and also because it does not consider economics amenable to mathematical treatment.) It would never take its counterfactual models per se as representative of the actual world by themselves.

Freedom of markets is positively correlated with the degree of evolution in any society...

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Giant_Joe replied on Thu, Jul 29 2010 11:27 PM

The neoclassicals tend to use models that are more or less mathematical in nature, and make use of different assumptions, different lines of economic thinking/reasoning, etc.... But the difference between "economic models" and "imaginary constructs?" I'd say there really is no difference there.

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Solid_Choke replied on Thu, Jul 29 2010 11:32 PM

The neoclassicals tend to use models that are more or less mathematical in nature, and make use of different assumptions, different lines of economic thinking/reasoning, etc.... But the difference between "economic models" and "imaginary constructs?" I'd say there really is no difference there.

Wouldn't that mean that the AE critique of model building, per se, is misguided?

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Answered (Verified) Jon Irenicus replied on Thu, Jul 29 2010 11:40 PM
Verified by nirgrahamUK

The "models" are solely for conceptual clarification, e.g. differentiating interest from profit from money. They're not predictive devices. Austrianism opposes trying to build economic theory out of predictive models and using mathematical language when ordinary language would do the job just as well (and also because it does not consider economics amenable to mathematical treatment.) It would never take its counterfactual models per se as representative of the actual world by themselves.

Freedom of markets is positively correlated with the degree of evolution in any society...

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Michael J Green replied on Thu, Jul 29 2010 11:41 PM

Reference for everyone: The Scope and Method of Catallactics: The Method of Imaginary Constructions.

I've never been concerned about the distinction myself, but I would say that perhaps economic models are treated as if they necessarily depict reality and are largely based upon historical data, whereas imaginary constructs are logical inquiries that are used to better comprehend reality. The imaginary construct is a tool for clear thinking, and should not be taken as a tool for prediction... But, honestly, I'm talking out of my behind.

EDIT: Aaaaaand Jon Irenicus beats me to the punch.

"People kill each other for prophetic certainties, hardly for falsifiable hypotheses." - Peter Berger
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Solid_Choke replied on Thu, Jul 29 2010 11:43 PM

Jon Irenicus, do you mean that it isn't the models that AEs have a problem with, but the use of the models (for prediction)?

"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay

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Jon Irenicus replied on Thu, Jul 29 2010 11:45 PM

Yeah, it depends on the purposes of the model. They're not opposed to counterfactual analytics if you mean those.

Freedom of markets is positively correlated with the degree of evolution in any society...

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Lagrange multiplier replied on Fri, Jul 30 2010 4:47 PM

Yes, because mathematical models are terrible for tracking and elucidating observable patterns.

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chloe732 replied on Sat, Jul 31 2010 5:02 PM

Neoclassical:
Yes, because mathematical models are terrible for tracking and elucidating observable patterns.

Fighting words or serious discussion?

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Caley McKibbin replied on Sat, Jul 31 2010 5:36 PM

Fighting words or serious discussion?

Serious would be saying something serious.

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yessir replied on Sat, Jul 31 2010 6:30 PM

 

But Austrians then don't go on and say, my economic model shows perfect competition > monopoly, THEREFORE, when encountering monopoly in the real world we must break it up!

 
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