Aki Lehtinen

Economic Modelling as Robustness Analysis

We claim that the process of theoretical model refinement in economics is best characterised as robustness analysis: the systematic examination of the robustness of modelling results with respect to particular modelling assumptions. We argue that this practise has epistemic value by extending William Wimsatt’s account of robustness analysis as triangulation via independent means of determination. For economists robustness analysis is a crucial methodological strategy because their models are often based on idealisations and abstractions, and it is usually difficult to tell which idealisations are truly harmful. 1. Introduction2. Making Sense of Robustness3. Robustness in Economics4. The Epistemic Import of Robustness Analysis5. An Illustration: Geographical Economics Models6. Independence of Derivations7. Concluding Remarks Introduction Making Sense of Robustness Robustness in Economics The Epistemic Import of Robustness Analysis An Illustration: Geographical Economics Models Independence of Derivations Concluding Remarks

Unrealistic Assumptions in Rational Choice Theory

The most common argument against the use of rational choice models outside economics is that they make unrealistic assumptions about individual behavior. We argue that whether the falsity of assumptions matters in a given model depends on which factors are explanatorily relevant. Since the explanatory factors may vary from application to application, effective criticism of economic model building should be based on model-specific arguments showing how the result really depends on the false assumptions. However, some modeling results in imperialistic applications are relatively robust with respect to unrealistic assumptions.

Economics Imperialism and Solution Concepts in Political Science

Political science and economic science . . . make use of the same language, the same mode of abstraction, the same instruments of thought and the same method of reasoning. (Black 1998, 354) Proponents as well as opponents of economics imperialism agree that imperialism is a matter of unification; providing a unified framework for social scientific analysis. Uskali Mäki distinguishes between derivational and ontological unification and argues that the latter should serve as a constraint for the former. We explore whether, in the case of rational-choice political science, self-interested behavior can be seen as a common causal element and solution concepts as the common derivational element, and whether the former constraints the use of the latter. We find that this is not the case. Instead, what is common to economics and rational-choice political science is a set of research heuristics and a focus on institutions with similar structures and forms of organization.

Three kinds of ‘as-if’ claims

As-if locutions are used (a) in order to indicate that an inaccurate or unrealistic assumption is being made because some inaccuracy or unrealisticness is negligible. This kind of claim has two sub-cases. (a1) The as-if locution is used to indicate that the as-if claim in itself is inaccurate and that its inaccuracy does not matter for the purposes of the investigation. (a2) It is used to indicate that claims are made without regard to the causal factors that are assumed to exist but are deemed to be unimportant. As-if locutions may also (b) formulate an accurate behavioural assumption by ascribing intentions or cognitions to an entity in an unrealistic manner or (c) indicate that the modeller is not committed to any particular mental assumptions. The various kinds of claims may be recognised by identifying their underlying ‘attributions’. (a2), (b) and (c) may be used in formulating an accurate claim.

Behavioral Heterogeneity Under Approval and Plurality Voting

Approval voting (AV) has been defended and criticized from many different viewpoints. In this paper, I will concentrate on two topics: preference intensities and strategic behavior. A voter is usually defined as voting sincerely under AV if he or she gives a vote to all candidates standing higher in his or her ranking than the lowest-ranking candidate for whom he or she gives a vote. There are no ‘holes’ in a voter’s approval set.1 Since this kind of behavior is extremely rare, it has been claimed that approval voting makes strategic voting unnecessary (Brams and Fishburn 1978). On the other hand, Niemi (1984) has argued (see also van Newenhizen and Saari 1988a,b), that even though strategic voting may be rare under AV, even incere voting may require a considerable amount of strategic thinking under this rule. If strategic voting is defined by the fact that a voter gives his or her vote to a candidate who is lower in his or her ranking than some candidate for whom he or she does not vote (see, e.g., Brams and Sanver 2006), I will be studying strategic behavior but not strategic voting under AV here.

A welfarist critique of social choice theory

This paper reconsiders the discussion on ordinal utilities versus preference intensities in voting theory. It is shown by way of an example that arguments concerning observability and risk-attitudes that have been presented in favour of Arrow’s Independence of Irrelevant Alternatives (IIA), and against utilitarian evaluation, fail due to strategic voting. The failure of these two arguments is then used to justify utilitarian evaluation of outcomes in voting. Given a utilitarian viewpoint, it is then argued that strategy-proofness is not normatively acceptable. Social choice theory is criticised not just by showing that some of its most important conditions are not normatively acceptable, but also by showing that the very idea of imposing condition on social choice function under the assumption of sincere behaviour does not make much sense because satisfying a condition does not quarantee that a voting rule actually has the properties that the condition confers to it under sincere behaviour. IIA, the binary intensity IIA, and monotonicity are used as illustrations of this phenomenon.

Preferences as total subjective comparative evaluations

I always look forward to read the texts of some philosophers because I have learned that they invariably give me something to think about. I consider Daniel Hausman as one such philosopher, and his new book did not let me down. Preference, Value, Choice, and Welfare is a compulsory reading for anyone interested in the preferential foundations of economics, ethics in economics, the role of preferences in game theory, welfare economics or the psychology of choice. The book is divided into three parts. The first part deals with the explanatory and predictive role of preferences in economics, and the second with the role of preferences in welfare economics, arguing that the connection between preferences and welfare is evidential. The last part describes the empirical shortcomings with the standard economic model of choice, and argues that economists should devote more effort to modelling preference formation. Given that he does an excellent job in telling the reader what is to come in the Introduction, I will not try to provide a detailed summary of the various chapters. Instead, in what follows, I will concentrate on the main idea of the book which is mostly discussed in the first part. In addition to trying to further illuminate the content of his proposal, I will express some qualms about it. The reason for writing a whole new book is that Hausman has developed an account of what preferences are in economics: they are total subjective comparative evaluations. They are evaluations because they are more akin to judgements than feelings, and they are comparative because unlike desires, they always compare at least two possible options, consequences or states of affairs. They are subjective because only the subject who is making choices ultimately knows what he or she takes to be the choice alternatives or their consequences. Choices cannot define preferences. Most importantly, they are total rather thanpartial in that they take into account all considerations that affect a person’s evaluations. An overall comparative evaluation takes some of the factors that affect the evaluation of alternatives as competing with preferences rather than as influencing them. Preferences are also total rather than overall in that all considerations that are not included in the beliefs or in the constraints are included in the preferences rather than compete with them. Hausman’s account surely meshes with economists’ own understanding of preferences. Indeed, it is somewhat surprising that Hausman does not even mention the fact that various game theorists have made similar claims about preferences. Kohlberg and Mertens (1986), Rubinstein (1991) and Binmore (1994) all argue that payoffs in games should include all possible considerations that affect the players’ preferences and thus their choices. It is possible that the omission is deliberate: unlike some of the

Introduction to the special issue: papers from the IX INEM Conference in Helsinki

Following an established tradition, the current special issue collects five articles that originate from papers presented at the IX Conference of the International Network for Economic Method. The conference took place in Helsinki on 1–3 September 2011 and was hosted by TINT (Trends and Tensions in Intellectual Integration), University of Helsinki. The conference was successful both in terms of the number of participants and the quality of the presentations. Although the sample of papers that made it to this special issue is relatively small, we think that it is representative of some of the major contemporary currents in the wider field of the philosophy and methodology of economics. The papers examine both long-debated and more recent issues. Brian Epstein questions whether macroeconomic properties supervene on microeconomic properties, a thesis that is often taken for granted by both reductionists and antireductionists. Epstein argues that this is a mistake: even if we fix the set of microeconomic properties, this does not suffice to exhaustively determine the macroeconomic properties. This failure of supervenience is not a metaphysical mystery. Rather, Epstein argues, it is a consequence of the different explanatory goals characteristic of macroeconomics and microeconomics. Petri Ylikoski and Emrah Aydinonat account for the epistemic value of abstract theoretical models by suggesting that they enlarge our knowledge about possible ways in which some phenomenon might come about, and by changing the criteria for relevant evidence. More importantly, they argue that one can only understand a model by comparing its assumptions to other models (robustness) and by comparing the explanation it provides with other competing explanations. Explanatory dependencies are best understood by contrasting how a model answers a series of what-if questions concerning a variety of aspects of a phenomenon with answers from other models in a family. Silvia Lerner provides an intensional framework for analyzing framing effects. One way of looking at such a logical construction is that it provides the experimenter or theorist with an external perspective with which to discuss the rationality of framing effects: framing seems irrational if it is viewed from the perspective of the nonlinguistic choice objects, but if the domain of decision theory consists of descriptions of objects, this is not necessarily the case. The framework allows experimenters or theorists to represent the extensional and the intensional interpretations of the choice objects in the same model. Alessio Moneta and Federica Russo examine causal modeling in econometrics. They take causal models to be statistical models ‘augmented’ with causal information and