ORI GIN AL ARTICLE

Credible Worlds, Capacities and Mechanisms

Robert Sugden

Received: 15 April 2008 / Accepted: 1 September 2008 / Published online: 9 January 2009

� Springer Science+Business Media B.V. 2009

Abstract This paper asks how, in science in general and in economics in par-

ticular, theoretical models aid the understanding of real-world phenomena. Using

specific models in economics and biology as test cases, it considers three alternative

answers: that models are tools for isolating the ‘capacities’ of causal factors in the

real world; that modelling is ‘conceptual exploration’ which ultimately contributes

to the development of genuinely explanatory theories; and that models are credible

counterfactual worlds from which inductive inferences can be made. The paper

argues that the ‘credible worlds’ account captures significant aspects of scientific

practice, even if many modellers see their work as conceptual exploration.

1 Introduction

Economic theorists construct highly abstract models. If interpreted as representa-

tions of the real world, these models appear absurdly unrealistic; yet economists

claim to find them useful in understanding real economic phenomena. This prompts

the question: Do these models really help us to understand the world, and if so,

how?

This is a question not only for philosophers of science but also for practising

economic theorists such as myself. Trying to sort out my ideas some years ago, I

wrote a paper, ‘Credible worlds’ (Sugden 2000). Using two famous modelling

exercises as examples—George Akerlof’s (1970) model of the used car market and

Thomas Schelling’s (1978) model of racial segregation—I looked at what those

modellers actually said about the relationship between model and world. Each paper

contains frequent references to real-world phenomena; these references make sense

only on the supposition that the models are intended to explain those phenomena.

R. Sugden (&)

School of Economics, University of East Anglia, Norwich NR4 7TJ, UK

e-mail: r.sugden@uea.ac.uk

123

Erkenn (2009) 70:3–27

DOI 10.1007/s10670-008-9134-x

But each author is remarkably inventive in finding ways of suggesting that his

model tells us about the world while avoiding any concrete claims about what it

does tell us. I tried to find an explanation of what these modellers were doing that

was consistent with this puzzling imprecision. I offered an account of models as

credible but counterfactual worlds, paralleling the real world rather than isolatingfeatures of reality. I argued that the gap between model world and real world has to

be crossed by inductive inference, and that inductive inference depends on

subjective judgements of ‘similarity’, ‘salience’ and ‘credibility’ which cannot be

formulated in the mathematical and logical languages preferred by economic

theorists. Imprecision of language when moving from one world to the other serves

to hide embarrassment about claiming validity for inductive inferences. The present

paper offers some further reflections on the ‘credible worlds’ argument, and

responds to various criticisms of that argument, particularly by other authors in the

present symposium and by Emrah Aydinonat (2007).

Some readers may be inclined to think that the imprecision with which we

economists speak about how our theoretical models relate to the world is a sign of

the weakness of our claim to be scientists. Indeed, Nancy Cartwright (2009) has

contrasted the work of economists and physicists, arguing that models in economics

differ from those of physics in failing to provide an adequate basis for induction to

the real world. So it is relevant to ask whether natural scientists are less reticent

about what can be learned from abstract models, and about how it is learned. I will

argue that the puzzling features of economists’ discussions of their models are

paralleled in some of the work of theoretical biologists.

In the decade since I first presented the ‘credible worlds’ argument, I have

discussed my ideas with many methodologists of economics, and I have had many

more opportunities to study what economic modellers do. In my discussions

with methodologists, I have found that two contrasting accounts of the role of

theoretical models in economics are particularly widely held. The first is that

models are tools for isolating ‘tendencies’ or ‘capacities’ that operate in the real

world but which, because of the complexity of real environments, are difficult to

investigate directly. The second account is that models do not tell us anything

about the real world; they merely provide abstract components which may prove

useful in developing genuinely explanatory theories. In this symposium, most of

the criticisms of the credible worlds argument are made from one or other of these

two standpoints. As a participant observer of the practices of economics, my sense

is that most theoretical modellers are inclined towards the second account: they

feel most comfortable when describing their work in these terms. However, I still

believe that the credible worlds account captures significant features of how

models are used in economics.

In this paper, I contrast the ‘credible worlds’ conception of modelling with each

of its main rivals. The idea that models are isolating tools will be represented by the

work of Nancy Cartwright. In presenting the idea that models do not tell us about

the world, I draw on Thomas Schelling’s discussion of ‘social mechanisms’.

It will help to avoid confusion if I say straight away that, in this paper, I am not

directly concerned with questions about the nature of scientific knowledge—for

example, about whether claims to economic knowledge should be understood in

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terms of the conceptual schemes of realism, instrumentalism or pragmatism.1 My

concern is with a question that is closer to the consciousness of most practising

economists—how, or whether, theoretical models help us to understand the world,

whatever philosophical gloss is given to the concept of ‘understanding’.

2 A Sketch of the Terrain

This paper is about theoretical models, primarily in economics. Since I will not be

concerned with other types of model, I will from now on drop the qualifier

‘theoretical’.

It is surely uncontroversial that in most economic models, the entities that are

assembled and manipulated are labelled in ways that refer to real-world correlates.

Sometimes this labelling uses ordinary, non-technical language (for example,

models may contain ‘individuals’ with ‘preferences’ over ‘goods’, or ‘firms’ which

seek ‘profit’). In other cases, technical economic terms are used (for example,

‘utility’, ‘subjective probability’ or ‘signal’); but these terms often have reasonably

straightforward translations into ordinary language. When the entities of the model

are interpreted according to these labels, their interactions in the model normally

make at least rough intuitive sense, a sense that modellers sometimes acknowledge

by speaking about the ‘story’ embedded in a model. A related metaphor is implicit

in the familiar idea of the ‘real world’. The opposite of the real world is the modelworld—the world that the model describes. The point of all this is that the properties

of the model, and the manipulation of these properties by the modeller, can be

described in two parallel ways. They can be described in formal, abstract terms,

with no significance being attached to the ordinary-language meaning of the

labelling; or they can be described as propositions about an imaginary but

imaginable world.

Consider a model that is fully specified by the set of properties A = {A1,…, An}.

Suppose that if we take the corresponding formal propositions and apply accepted

principles of mathematics and deductive logic, we derive a proposition that

corresponds to the property R. One standard way of describing what we have done is

to say that A1,…, An are the assumptions of the model, and R is a result. We might

also say that we have investigated a model world with properties A1,…, An, and have

shown that it also has (indeed, must have) property R. Or, we might say that we have

shown that if A1,…, An were properties of the real world, then R would (necessarily)

be a property of the real world too. In many modelling exercises, it makes sense to

describe the relationship between A1,…, An and R as a mechanism by which A1,…,

An interact to bring about R. Then we can say that this mechanism operates in the

model world, and that if A1,…, An were properties of the real world, then it would

operate in the real world too.

One option is simply to stop at this point. This gives us an understanding of

modelling according to which models do not tell us anything substantive about the

1 I now regret the passages in Sugden (2000, p. 12) in which I claim that the modelling strategies of

Akerlof and Schelling are clearly realist.

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real world; they are merely tools for what Daniel Hausman (1992, p. 221) calls

‘‘conceptual exploration’’.

A second option corresponds with my understanding of the idea that models are

isolating tools. Suppose that A can be partitioned into three subsets,

L = {L1,…, L‘}, S = {S1,…, Ss} and X = {X1,…, Xx}. L1,…, L‘ are interpreted

as empirical laws whose truth is beyond reasonable doubt: we can say that we knowthat L1,…, L‘ are properties of the real world. S1,…, Ss are interpreted as substantiveassumptions, while X1,…, Xx are auxiliary assumptions. (I will explain what I mean

by this distinction in the next paragraph; until then, nothing hangs on it.) We can

now re-describe the modelling exercise by omitting explicit reference to the laws.

We can say that we have investigated a model world with properties S1,…, Ss,

X1,…, Xx, and have shown that it also has property R. (In saying this, we taking it as

read that any model world should satisfy what Maki (2009) calls the ‘way the world

works’ constraint.) Or we can say that we have shown that if S1,…, Ss, X1,…, Xx

were properties of the real world, then R would be a property of the real world too.

We can treat the relationship between S1,…, Ss, X1,…, Xx and R as the mechanism

exhibited by the model. This mechanism operates in the model world. If S1,…, Ss,

X1,…, Xx were properties of the real world, it would operate in that world too.

Notice that, if we follow this strategy, we generate empirical if…then…propositions

rather than necessary truths. Because these propositions have been reached by

deductive reasoning, using as premises only known empirical laws, they are firmly

grounded. It seems that we are entitled to say that we know they are true.

This approach can be refined by using the distinction between substantive and

auxiliary assumptions. Suppose that, for whatever reason, we think of the

substantive assumptions as essential components of the mechanism we are

describing, and the auxiliary assumptions as merely providing a medium in which

that mechanism can work. We investigate many models, all of which use the same S(and L) assumptions as before, but with different specifications of X. We find that, in

all these models, R can be derived as a result. One way of describing this exercise is

as a robustness test: we have found that the link between S and R is robust. Then, we

might make the inductive inference that, in any model with these S (and L)

properties, it is very probably the case that R can be derived. An equivalent

inference is that, if S1,…, Ss were properties of the real world, then (very probably)

R would be too. This if…then…proposition specifies what Cartwright would call a

capacity.

On this understanding, there is a significant analogy between models and

experiments. In setting up a model with L, S and X as the assumptions, we are asking

what would happen if we created a real-world situation with properties S and X. We

could carry out this investigation experimentally by setting up such a situation and

waiting to see the effects of whatever empirical laws really are in operation. In using

the model instead, we assume that we already know the relevant laws (these are

contained in L), and simulate their operation. Similarly, robustness tests in

modelling simulate robustness tests in experimentation. A capacity can be

demonstrated either by a robust modelling result or by a robust experimental

finding.

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The isolation approach allows us to understand modelling as a source of firmly-

grounded substantive knowledge about the real world. But there is snag: in the

context of typical modelling exercises in economics, this approach generates very

little knowledge. Economic models typically contain many substantive assumptions,

which do most of the work in generating the results. Known empirical laws

contribute rather little.

If that is right, there seem to be at least three alternative responses for economists

to take. The first is to acknowledge that models do not tell us anything substantive

about the real world, but still to defend modelling as a useful activity. That leaves us

with conceptual exploration. The second is to insist that modelling is useful only in

so far as it generates firmly-grounded knowledge about capacities, and to conclude

that the value of modelling in economics is rather low. That, roughly, is

Cartwright’s response. The third is to look for something less than firmly-grounded

knowledge, and to argue that modelling can support beliefs or conjectures about

substantive properties of the real world. That is what the credible worlds account of

modelling tries to do.

I contend that, in their practice, economic theorists are unwilling to take either of

the first two approaches wholeheartedly. Intuitively, they believe that their models

support conjectures about the real world, and they want to communicate those

conjectures in a convincing way. But the conjectures they want to make cannot be

supported by deductive argument, even if that is supplemented by the circumscribed

form of inductive inference that supports conclusions about robustness. They ease

this tension by avoiding explicit claims about how their models relate to the real

world, leaving their readers to make the necessary inferences themselves.

To clarify this contention, consider again the case of a model which is fully

specified by some set of empirical laws L, some set of substantive assumptions S,

and some set of auxiliary assumptions X. Suppose the result R is derived, and that

this finding is robust to changes in the specification of X. Suppose too that we

know that the real world has property R, but not whether it has the properties

S1,…, Ss. Does the model support the conjecture that S1,…, Ss are properties of

the real world? Putting this another way, in our family of model worlds, there is a

common mechanism which reliably generates a property that we observe in the

real world. Does this support the conjecture that a similar mechanism is operating

in the real world? If we confine ourselves to deductive reasoning and robustness

analysis, the answer to these questions is surely ‘‘No’’. But modellers often seem

to want to claim that conjectures of this kind are supported by their models, even

if they stop just short of making these claims explicit. Implicitly, they seem to be

using some kind of abductive inference (inferring causes from effects).2 The

credible worlds account is an attempt to understand how models can support

conjectures about the real world.

2 I say more about abduction in Sugden (2000, pp. 19–20). Following Mill (1843/1967, p. 186), I

interpret ‘induction’ to include any mode of reasoning which takes us from specific propositions to more

general ones. This makes abduction a sub-category of induction.

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3 An Example from Economics: Banerjee’s Herding Model

Since I am concerned with what modellers actually do, it is important to work with

concrete examples. I will not rehearse my previous analysis of Akerlof’s and

Schelling’s models, but take that as read. To avoid repetition, I use a new example

from economics: the much-cited paper in which Abhijit Banerjee (1992) presents a

model of ‘‘herding behaviour’’.

Banerjee’s opening paragraph skims over a range of social and economic

situations in which there is a tendency for herding or clustering—for people to

choose particular options because other people are choosing them. Some of

Banerjee’s examples—people patronising particular shops, restaurants or schools

just because they are popular, academics choosing particular research topics just

because other academics are doing so—are drawn from what he takes to be the

common experience of his readers. Others—herding behaviour in decisions about

financial assets, about whether to have children, and about voting—have been

reported in the literature of social science. Banerjee then declares his objective:

‘‘The aim of this paper is to develop a simple model in which we can study the

rationale behind this kind of decision making as well as its implications’’ (p. 798).

Notice that the model is intended as an investigation of the rationale—by which I

take Banerjee to mean a rational-choice explanation—of a type of behaviour whose

existence in the real world is taken as a fact.

Banerjee begins his analysis with a stripped-down version of his model. Two

restaurants, A and B, are located next to one another. There are 100 consumers, each

of whom wants to eat at the better restaurant. One restaurant is in fact better than the

other, but no one is sure which is better and which is worse. There is a prior

probability of 0.51 that A is better; this is common knowledge among consumers. In

addition, each consumer receives a private and independent signal which indicates

with high (but not perfect) reliability which really is better. Consumers arrive at the

restaurants in sequence. On arrival, each consumer can see how many previous

arrivals have gone to each restaurant. Suppose that one consumer receives a signal

indicating that A is better, and that he is the first arrival; all the others receive signals

favouring B. It is rational for the first arrival to choose A. But then the second arrival

can infer that the first arrival’s signal favoured A. Since the prior probability that Ais better is greater than 0.5, the posterior probability that A is better, conditional on

one signal favouring A and one favouring B, is greater than 0.5 too; so it is optimal

for the second arrival to go to A. The third arrival sees that the first and second have

chosen A. That the first arrival has chosen A is evidence that his signal favoured A.

That the second arrival, knowing this, chose A provides no additional information

(since she would have chosen A whatever her own signal). But still, this is enough

information to make A the best choice for the third arrival, even though his signal

favours B. And so it continues: everyone ends up at A, even though their aggregate

information makes it virtually certain that B is better.

Most of the rest of the paper is devoted to the analysis of a more sophisticated

variant of the restaurant model. Banerjee derives a number of striking results about

Bayesian-Nash equilibrium in this model. The main result is that, with very high

probability, the equilibrium outcome is inefficient. (As in the restaurant case,

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everyone clusters at the option chosen by the first arrival.) A subsidiary result is that

the equilibrium outcome is highly volatile across different plays of the game.

Towards the end of the paper, Banerjee discusses possible ‘‘extensions and

modifications’’ of the basic model. These respond to potential criticisms of the

realism of his assumptions as representations of real-world environments. In some

cases, he concedes that his assumptions are unrealistic, but shows that his results are

robust to more realistic re-specifications of the model. For example, reviewing the

assumption that all individuals who choose the same option receive the same payoff,

he says that this may be approximately correct in the restaurant case, but in ‘‘many

other real world examples’’ payoffs may depend on who chose which option first.

He shows that his main qualitative results still hold if payoffs have this property. In

other cases, he appeals to facts about the real world to support the claim that, despite

appearances to the contrary, the assumptions are adequately realistic. For example,

he considers the criticism that the model should take account of incentive

mechanisms that might be put in place to counteract herding. His response is that

‘‘in many of the cases we consider’’ effective incentive systems are infeasible.

These ‘‘extensions and modifications’’ reconfirm that Banerjee’s objective is to

explain real-world phenomena. Notice that realism is defined relative to a set of

‘‘cases we consider’’: the implication is that there is some set of real-world

phenomena, specified independently of the model, which the model is to explain.

But what inferences about these phenomena should we draw? On this, Banerjee is

almost completely silent.

Apart from the passages I have already quoted, I can find only two sentences

which refer to inferences from the model to the real world. The first comes after the

presentation of the result that, in the model, equilibrium is volatile. Banerjee says:

‘‘This may shed some light on observations of ‘excess volatility’ made in the

context of many asset markets and the frequent and apparently unpredictable

changes in fashions’’ (p. 800). Here, there is a claim that the model tells us (or, at

least, may tell us) something about the real word; but the wording seems

deliberately vague about what we are told. The second sentence follows a discussion

of a rival explanation of herding, which assumes that the agents who herd are

rewarded for convincing third parties that their decisions are correct. Banerjee notes

that this assumption does not apply to many of the cases he is considering, and

concludes: ‘‘It is therefore useful to establish that inefficient herd behavior can arise

even when the individuals themselves capture the rewards from their decisions’’ (p.

801). Here, I take it, Banerjee is claiming that his model is better able than its rival

to explain some significant real-world instances of herding. But what is most

striking from all this is just how little Banerjee feels he needs to say about the

relationship between the model and the real world.

This property of Banerjee’s presentation is entirely normal in the literature of

economic modelling. As I show in my 2000 paper, Akerloff’s and Schelling’s

accounts of their models have just the same feature. It seems that, within economics,

explicit discussion of the relationship between a model and the corresponding real-world phenomena is not required. In the present case, Banerjee describes a real-world

phenomenon, namely herding, in general terms. He then constructs a well-specified

model world and derives specific conclusions about what happens within it. What we

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see in the model world is a form of herding, caused by a mechanism of information

and signalling. By means of the restaurant story, he links the formal objects of the

mathematical model with things in the real world with which we (the readers) are

familiar. Very informally, he invites us to consult our experience of restaurants and to

conclude that what is going on in his model world is in some way similar to that

experience. And that is it: we are left to draw the appropriate conclusions.

From Banerjee’s stated aims, we can infer that we are expected to learn

something about real-world herding. That something, presumably, is that real-world

herding behaviour is, or at least may be, induced by a mechanism of imperfect

information and signalling similar to that exhibited in the model. The model itself

provides a stylised description of the mechanism he has in mind, and shows how

that mechanism leads to herding behaviour in the world of the model. We are being

invited to infer that the same mechanism may be at work in the relevant real-world

cases. Given the stylised nature of the model, this ‘may be’ is perhaps best

interpreted as a cautious conjecture: Banerjee is trying to convince us that we should

take seriously the possibility that his explanation of real-world herding is correct.

Still, what we are being asked to take seriously is a hypothesis about the causation

of actual events.

How can Banerjee’s model tell us anything, however speculative, about causation

in the real world? The implicit argument, I suggest, is abductive. The effect of

herding in the model world is similar to that of herding in the real world. From the

similarity of effects, we are invited to infer the likelihood of similar causes: the

model gives us some grounds for confidence in the hypothesis that real-world

herding is caused by a mechanism similar to the one that causes herding in the

model. The essential structure of the argument is: from some similarities, infer

others. Thus, we can have more confidence in inferences from the model world to

the real world, the more similar the two are. Since the model world is so stylised, ‘‘is

similar to’’ cannot sensibly be read as ‘‘realistically describes’’. But we can ask for

credibility in the sense that the fictional world of the model is one that could be real.

This, I suggest, is where the story of the restaurants comes in. We are expected to be

able to imagine the world of the two restaurants, and to think of the information

structure and individual motivations of this world as like ones we have experienced

in reality.

4 An Example from Biology: Maynard Smith and Price’s Modelof Asymmetric Animal Contests

My example from theoretical biology is a classic paper by John Maynard Smith and

Geoffrey Parker (1976), ‘‘The logic of asymmetric contests’’. This was one of the

earliest contributions to a literature initiated by Maynard Smith and George Price

(1973), which uses a form of game theory to analyse animal behaviour in situations

of conflict.3 Typical examples are cases in which two animals of the same species

3 As an economist, I have a natural interest in this particular branch of theoretical biology. However, it

would be a mistake to think of this literature as importing into biology a modelling strategy from

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come into conflict over nesting sites, feeding sites or mating opportunities. The

general object is to understand how such conflicts are structured and what

determines which contestant wins and which loses.

Maynard Smith and Parker (from now on, ‘MSP’) begin their paper by stating

their objective: ‘‘This paper discusses the question, ‘How would we expect animals

to behave in conflict situations?’’’ Their particular concern is with asymmetriccontests—that is, conflicts in which the two contestants occupy asymmetric

positions, with the implication that, in principle, the resolution of the conflict could

be determined by that asymmetry. MSP distinguish between three types of

asymmetry. There is payoff asymmetry if one contestant stands to gain more than the

other from victory, or stands to lose less than the other from defeat. There is

asymmetry in resource-holding potential if one contestant has greater fighting

ability than the other, and so is more likely to be the winner. And there is

uncorrelated asymmetry if the contestants differ in some respect which, while

capable of being recognised by the contestants themselves, is uncorrelated both with

payoffs and with fighting ability. MSP are primarily concerned with this third type

of asymmetry.

In principle, a conflict could be resolved by using an uncorrelated asymmetry to

determine which contestant is the winner. However, MSP admit that they cannot

give any real examples of this form of conflict resolution. In nature, they suggest,

the symmetries that are used to resolve contests will almost always be correlated

with differences in payoff or fighting ability. But:

It is, however, important to analyse contests which are uncorrelated in the

above sense, because if it can be shown that completely uncorrelated

asymmetries can settle contests, then the argument that differences in pay-off

or RHP [resource-holding potential] are too small to explain the conventional

settling of disputes is irrelevant. Thus it is no part of our argument that

differences in pay-off and RHP do not exist, only that they need not exist for

contests to be settled conventionally (p. 159).

I take it that a contest is ‘‘settled conventionally’’ if it is resolved without

significant cost to either contestant, as a result of their both recognising some cue

which tells them who should accept defeat. It might seem from this quotation that

MSP are setting out to show only that a contest could be resolved by an asymmetric

convention. But, as will emerge later, their model is used to support a stronger

claim—that if, in a given contest, the only commonly-recognised asymmetry is

uncorrelated, then that asymmetry will be used to resolve the conflict.

MSP develop their argument by presenting an extremely simple and apparently

unrealistic model of an animal conflict. Their general modelling strategy is to

represent animal contests as two-player games, in which strategies represent

Footnote 3 continued

economics. Initially, game-theoretic modelling in biology and in economics developed independently of

one another (see Maynard Smith 1982, p. 10). In the 1970s, most economists interpreted game theory as

the analysis of strategic interaction between perfectly rational players. The evolutionary interpretation of

game theory, now fashionable in economics, began as an import from biology, drawing heavily on the

work of Maynard Smith and his collaborators (e.g. Sugden 1986).

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alternative behaviour patterns and payoffs are measured in units of Darwinian

fitness (that is, as changes in the expected number of offspring contingent on the

relevant outcome, measured relative to some baseline). The core game (now

generally known as Hawk–Dove) has two contestants A and B in conflict over some

resource. Each contestant has two alternative pure strategies, escalate (act with

increasing aggression until the other contestant backs down or until one contestant is

seriously injured) and retreat (back down at the first sign of aggression by the other

contestant). The payoff matrix for the game is shown in Table 1. Incremental fitness

is measured relative to the outcome of playing retreat against escalate (that is,

winning nothing but not having to fight). V is the value of the resource and D is the

cost of injury to the loser of a fight; D [ V [ 0, implying that escalate is the best

response to retreat and vice versa. The symmetry of the payoff matrix represents the

assumption that the asymmetry between A and B is uncorrelated with payoffs or

fighting ability; it is assumed that if both contestants escalate, each is equally likely

to win the fight, and that if both retreat, each has an equal chance of getting the

resource without having to fight. MSP suggest the interpretation that A is the

‘‘discoverer’’ of the disputed resource and that B is the ‘‘late-comer’’.

Notice that the specification of the game incorporates some drastic simplifica-

tions of real-world animal contests. As I have explained, the symmetry of the payoff

matrix is an unrealistic assumption, deliberately introduced by MSP to isolate the

mechanism they wish to investigate. The assumption that there are only two levels

of aggression simplifies the analysis by transforming a general feature of the real

world (in any contest there is a spectrum of alternative behaviours, differing in their

degrees of aggression) into a concrete property of the model world. MSP offer no

defence of this assumption, simply instructing the reader: ‘‘Consider now a contest

in which two pure strategies are possible’’ (p. 161). It is implicit in the specification

of the game that both players recognise the asymmetry between A and B. MSP

simply state that they are assuming ‘‘perfect information’’. The real-world

asymmetries that they use as illustrations (for example, discoverer versus late-

comer, large animal versus small animal) are ones which it seems credible to

suppose that animals could use as cues, but presumably it would be more realistic to

postulate imperfect information about such asymmetries. MSP implicitly recognise

that the perfect information assumption is unrealistic, and defend it on grounds of

tractability: ‘‘Contests in which there is perfect information available to both

contestants are in general rather easy to analyse…Much greater difficulties arise

when only partial information exists’’ (p. 160). Later in the paper they explore some

ways of relaxing this assumption (pp. 166–171).

Table 1 The Hawk-Dove game

B’s Strategy

escalate retreat

A’s Strategyescalate (V – D)/2, (V – D)/2 V, 0

retreat 0, V V/2, V/2

D [ V [ 0

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MSP introduce a further set of simplifications by carrying out their analysis in

terms of the concept of an evolutionarily stable strategy (ESS), introduced by

Maynard Smith (1974). In the first paragraph of their paper, MSP report (and

implicitly endorse) Maynard Smith’s argument ‘‘that natural selection, acting

between individuals, would produce such a strategy [i.e. an ESS]’’ (Maynard Smith

and Parker 1976, p. 159). Roughly, the pattern of behaviour in a population of

animals of a given species is an ESS if that population cannot be successfully

invaded by any mutant with a different behaviour. However, as MSP explain, this

concept of ‘invasion’ is a property of a highly simplified model of natural selection

(pp. 160–161). Among the assumptions of this model are the following. First, each

mode of behaviour has a distinct genotype. (Thus, the evolution of behaviour can be

explained by genetic selection rather than, for example, by developmental or

environmental influences on given genotypes.) Second, the genetic determination of

behaviour in contests is independent of the determination of the roles A and B. (For

example, the probability that a given animal plays the role of discoverer is the same

whether it has the escalate or retreat genotype.) The third assumption is so

unrealistic that MSP seem reluctant to state it outright.

The concept of an ESS, interpreted literally, applies only to species which

reproduce asexually. If there is asexual reproduction, a genotype for behaviour

which is successful in terms of Darwinian fitness will, by definition, be successful in

creating copies of itself in the next generation. But if reproduction is sexual, there is

genetic recombination between generations, and so it is not necessarily true that the

fittest genotypes will increase in frequency from generation to generation. As a

simple counter-example, consider the case of a behaviour that is determined by two

alleles, A and a, for the same genetic locus. There are three relevant genotypes, AA,

Aa and aa. The relative frequency of these three genotypes is determined by only

one parameter, the relative frequency of A. In particular, the Aa genotype can be

generated only in a gene pool which also generates AA and aa genotypes. So if the

behaviour induced by Aa maximises Darwinian fitness, we will not observe a

population in which all individuals behave in this way.4

MSP approach this issue obliquely, with the opening remark: ‘‘A word must be

said about the inheritance of behavioural strategies’’. They present three alternative

forms of inheritance. The first possibility is that ‘‘[e]ach strategy, pure or mixed, can

reproduce itself without genetic recombination with others’’. This is shown to justify

the use of ESS models. The second possibility is that only pure strategies can

reproduce, and that (as before) reproduction is without recombination. The

differences between this and the first possibility are not particularly relevant in

the relation to the Hawk–Dove game, in which the interesting ESSs involve pure

strategies. The third possibility is the realistic one. All that MSP have to say about

this is the following:

(iii) Bisexual inheritance with genetic recombination. Nothing general can be

said. There are cases (e.g. the ‘‘war of attrition’’) in which the ESS calls for a

frequency distribution which could not be maintained under sexual

4 This issue is discussed by Maynard Smith (1982, pp. 4, 20–22).

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reproduction with most types of genetic determination. In such cases,

simulation suggests that the genetic equilibrium will approach as close to the

ESS as the genetic system allows (p. 161).

In effect, then, MSP are assuming asexual reproduction. This assumption is

particularly interesting because, taken at face value, it is neither a limiting case of a

property of the real world nor a way of making a general property of the real world

more concrete. In a later work, addressed to a more general readership, Maynard

Smith (1982) explicitly acknowledges that ESS models assume asexual reproduc-

tion, and offers the following justification:

The basic assumption of evolutionary game theory—that like begets like—

corresponds to what we actually know about heredity in most cases. To

analyse a more detailed genetic model would be out of place. For example, it

is relevant to the evolution of wing form that the shape which generates a

given lift for the minimum induced drag is an elliptical one. If someone were

to say ‘‘Maybe, but how do you know that a bird with an elliptical wing is not

a genetic heterozygote which cannot breed true?’’, he would rightly be

regarded as unreasonable (1982, p. 4).

In other words, it is a general practice in biology to use the ‘‘like begets like’’

principle as a default assumption when explaining the broad properties of the

products of natural selection, even though it is known not to apply universally.

Maynard Smith (1982, pp. 4, 20–22) offers some biological reasons for expecting

this assumption to be reasonably accurate, and implies that he believes that it has

proved sufficiently reliable in comparable previous cases. Default assumptions of

this kind are a common motif in modelling: compare the assumption that firms

maximise profit, made in many economic models.

It is now time to consider the use that MSP make of the Hawk–Dove model.

The central theoretical result is that the game has two ESSs, ‘‘escalate if A,

retreat if B’’ and ‘‘retreat if A, escalate if B’’. The implication is that, in the world

of the model, natural selection will lead to the evolution of a conventional

resolution of the conflict. Even though the asymmetry is correlated neither with

payoffs nor with fighting ability, it will provide the cue for settling the contest

(pp. 163–164).

Having established this result, MSP consider the effects of relaxing some of their

assumptions. In the context of their main argument, the most important analysis is of

the effects of relaxing the assumption that the asymmetry is uncorrelated. Suppose,

for example, that the asymmetry is correlated with payoffs, so that on average A (the

‘discoverer’) stands to gain slightly more from victory than B (the ‘late-comer’). If

the difference is payoffs is relatively small, the previous result still holds: there are

two ESSs. One of these (which MSP call the common-sense ESS) settles the contest

in favour of A; the other (the paradoxical ESS) settles it in favour of B. MSP present

a variant model in which the asymmetry between A and B is correlated with payoffs

in this way.5 In the initial state of this model, contestants are assumed to ignore the

5 In MSP’s paper, this analysis is framed in terms of a different model of conflict, the ‘‘War of Attrition’’;

but the arguments apply with equal force to the Hawk–Dove game.

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asymmetry between A and B; there is a mixed-strategy ESS in which contestants in

both roles sometimes escalate and sometimes retreat. MSP show that this

equilibrium can be invaded by a mutant which recognises the asymmetry and

plays the common-sense strategy, while it cannot be invaded by a mutant which

plays the paradoxical one.

It is only after completing their analysis of these various models that MSP turn to

the real world. The final section of the paper (roughly a quarter of the paper in

length) is entitled ‘‘Discussion’’, and explores the implications of the preceding

analysis for actual animal contests. This section begins:

Two general conclusions emerge from the preceding analysis, one relevant to

symmetric and the other to asymmetric contests. …In asymmetric contests,

mixed strategies will be the exception. Usually, some asymmetric feature will

be taken as a ‘cue’ by which a contest can be settled conventionally. We shall

discuss first whether there is any observational support for these two

conclusions (p. 171).

This passage marks the transition from model worlds to the real world. Notice

how quick the transition is, and how little is said to explain it. Up to this point, MSP

have said almost nothing about real animal contests; they have merely shown us

what happens in various model worlds. But they expect the reader to understand that

these modelling exercises lead to specific hypotheses about real animal contests—

hypotheses for which it may be possible to find ‘‘observational support’’.

It must be said that MSP’s methodological strategy differs from Banerjee’s

(and also from Akerlof’s and Schelling’s) in presenting an explicit empirical

hypothesis. However, that hypothesis is stated only in vague terms: asymmetric

contests are usually settled conventionally, even when differences in payoffs and

fighting ability are small. There is no explanation of how this general hypothesis

is derived from, or supported by, the model; it simply ‘‘emerges’’. And, although

the ‘‘Discussion’’ section refers to substantial empirical work on animal behaviour,

MSP do not attempt to test their general hypothesis. (Indeed, it is not clear how it

could be tested.) Instead, and like Banerjee, Akerlof and Schelling, MSP point to

an array of real-world cases in which observed behaviour resembles behaviour in

their models.

In relation to asymmetric contests, the relevant discussion of real-world evidence

comes in a subsection entitled ‘‘Are conventional cues used in nature to settle

asymmetric contests?’’ (pp. 172–173). MSP marshal a body of evidence about

asymmetric contests in nature. A typical example concerns competition between

male swallowtail butterflies for the hilltop territories that females visit in search of

mates. It has been observed that contests between males are normally settled very

quickly in favour of the first occupant. Noting that there is ‘‘no obvious reason’’ to

expect first arrival at a hilltop to be correlated with payoffs or fighting ability, MSP

cautiously suggest that this is ‘‘an example of an uncorrelated asymmetry being used

to settle a contest’’.

A further subsection of the ‘‘Discussion’’ deals with paradoxical ESSs (p. 174).

This subsection differs from the one on conventional cues in not presenting real-

world evidence. Instead, it proposes a hypothesis about the real world: ‘‘it is

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unlikely that paradoxical ESSs occur in nature’’.6 MSP defend this hypothesis by

referring back to the model of an asymmetry that is initially ignored, in which the

initial equilibrium can be invaded only by the common-sense ESS. Here again, we

see a very quick transition from a property of the model world to the hypothesis that

the real world has a similar property.

MSP’s methodological strategy is, I suggest, broadly similar to that of Banerjee,

Akrelof and Schelling. In each of these four papers, the central contribution is a

theoretical model (or set of models). Each model is a fully-specified, self-contained

and counterfactual world. The authors show that (human or animal) behaviour in

their models is governed by certain mechanisms or exhibits certain regularities. We,

the readers, are invited to conclude that we have been given some additional reason

to believe that mechanisms or regularities similar to those in the models will be

found in the real world; but the authors seem reluctant to say what that reason is.

Although the model world and the real world are both discussed, very little is said

explicitly about the relationship between one and the other.

5 Credible Worlds

In economics (and perhaps, as the example from biology suggests, in other sciences

too) there seems to be a convention that modellers need not be explicit about what

their models tell us about the real world. Given this convention, it is hardly

surprising that the question of what role models play in economics is controversial

among methodologists. However, that convention may also provide clues for

answering the methodological question. A satisfactory account of the role of

models, I submit, needs to be consistent with the fact that economists do not find

this convention awkward or constraining. I think that my account of models as

credible worlds helps us to understand what is going on.

One of my motivations for writing the 2000 paper was my sense of a mismatch

between how economic theorists understood their models and how modelling was

understood in (what were then) the most influential traditions of economic

methodology. I now realise that, at around this time, philosophers of science and

methodologists of economics were beginning to reappraise former ideas about the

role of models. One significant theme, developed by Margaret Morrison and Mary

Morgan (1999), was that models have an autonomous status, independent of both

theory and the world, by virtue of which they can help us to learn about theory, help

us to learn about the world, and mediate between the two. In a broad sense, my

paper was an exploration of some of these potentialities of models.

There are closer connections between my paper and Roland Giere’s (1988)

account of scientific explanation. Giere characterises a scientific theory as

comprising a set of related models and a set of hypotheses linking those models

with systems in the real world. A model is an abstract entity, created by the scientist,

6 Later, Maynard Smith (1982, pp. 85, 96) became aware of a few cases of what appear to be paradoxical

ESSs in nature. He interprets the rarity of these cases as supporting the hypothesis that paradoxical ESSs

are possible but unlikely.

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possessing exactly the properties that the scientist stipulates. In itself, it makes no

claims about the world. Hypotheses assert similarities between the model and the

world. Giere’s central example is Newtonian mechanics. For Giere, this theory has a

family of models with the ‘‘common general schema’’ that force equals mass

multiplied by acceleration. One such model is the two-particle gravitational system

in which force is related to distance and mass by Newton’s inverse square function.

The relative motions of the two particles in this model are properties of the model

and nothing more. But the theory includes hypotheses such as that the relative

motions of the earth and moon are very similar to those of particles in the model

(pp. 62–91). On this account, a model is a construction, not a stripped-down

description of the world. In investigating the properties of a model, that is all we are

doing: we are not deducing the effects of known laws in controlled or idealised real-

world systems. There is a sharp conceptual distinction between that activity and the

investigation of similarities between the model and the world.

The credible worlds account is based on a similar understanding of what models

are. It is essential to this account that the model world is a construction of the

modeller, with no claim to be anything other than this. Its specification is just

whatever the modeller has chosen it to be. In particular, there is no claim that it has

been constructed by stripping out some features of the real world and describing

what remains. In contrast, a model constructed in the latter way is, at least in

principle, an isolation in the following strong sense: by virtue of the method ofconstruction, it describes some aspect of reality, isolated from other factors. The

properties of such an isolating model, properly understood, are therefore also

properties of the real world. This is the sense of ‘isolation’ that I read into Maki’s

(1992, 1994) early work on the ‘‘method of isolation’’ in economics.

I now think that in my 2000 paper, my picture of the stripping-out process

involved in this strong form of isolation was too literal-minded. As Maki (2009)

points out, just about any practical attempt to isolate a real-world process will

involve adding something. For example, if we want to run a controlled experiment

to isolate the effects of different amounts of sunlight and water on the growth of

plants, we will need some common medium in which to grow our plants. Suppose

we use some standard, artificially sterilised compost mix. Then, in constructing the

experiment, we are not just stripping out naturally-occurring differences in soil

composition; we are introducing a new composition. Still, the experiment is an

exercise in isolation. For the same reasons, modelling isolation may require the

specification of a standardised environment in which the mechanisms to be studied

can operate. For example, and contrary to an argument in my 2000 paper, the

checkerboard form of Schelling’s model cities might be interpreted in this way.

However, I stand by the claim that, at least in economics, theoretical models are

typically not isolations in the strong sense. I will say more about this in Sect. 5,

when I discuss Cartwright’s account of modelling.

If the concepts of a model are given ordinary-language labels, and if the workings

of the model make rough intuitive sense in terms of those labels, it is possible to talk

about a model world. As I argued in Sect. 1, most economic models have this

property. So does MSP’s biological model. Given that a model world can be

described in this way, we can assess its credibility. Credibility is not the same thing

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as truth; it is closer to verisimilitude or truthlikeness. We perceive a model world as

credible by being able to think of it as a world that could be real—not in the sense of

assigning positive subjective probability to the event that it is real, but in the sense

that it is compatible with what we know, or think we know, about the general laws

governing events in the real world. In my 2000 paper, I offer the analogy of

credibility in realistic novels, which is developed by Till Grune-Yanoff (2009).

Maki’s (2009) ‘‘way the world works’’ constraint expresses a similar idea.

As Xavier de Donato Rodrıguez and Jesus Zamora Bonilla (2009) point out, the

idea that a credible world ‘‘could be real’’ cannot be taken too literally (as perhaps it

was in my 2000 paper). Economic models often contain idealisations which, if

interpreted literally, cannot be true. Continuity assumptions are a case in point:

economists routinely model integer-valued concepts as if they were continuously

variable. For most economists, this kind of idealisation is so normal a part of

modelling that it is barely noticeable. We know (or think we know) that continuity

assumptions do not materially affect the results we can derive, while making the

analysis much more tractable. When we think about the credibility or non-

credibility of a model, we mentally remove such idealisations and imagine the

corresponding integer-valued world.

One crucial difference between a credible world and an isolation is that a credible

world may be constructed around general empirical regularities—one might say,

empirical laws—that are merely postulated. For all we know, these regularities may

not be part of how the world really works. All that is required is that, in the current

state of knowledge, they are credible candidates for truth.

An illuminating example of this kind of credible world is described by Giere

(1988, pp. 249–252), who is my source for the following material. From the 1920s

to the early 1960s, the hypothesis of continental drift, first proposed by Alfred

Wegener, was controversial in geology. On the one hand, there was a large body of

evidence of geological, paleontological and biological correspondences between

widely-separated continents, all of which was consistent with the hypothesis that

previously contiguous land masses had broken up and drifted apart. On the other,

there seemed to be no physical mechanism which could move continental masses

such enormous distances. In the late 1920s, Arthur Holmes suggested a possible

answer, in the form of a sketch of a model in which convection currents in molten

material below the earth’s crust create a conveyor-belt effect which can drag

continents apart. Holmes had almost no positive evidence for what he later called ‘‘a

purely hypothetical mechanism’’, although he thought it compatible with what were

then recent discoveries about radioactive heating within the earth. One of the main

opponents of the continental drift hypothesis, Harold Jeffreys, acknowledged that,

as far as he could see, there was ‘‘nothing inherently impossible’’ in this mechanism,

while remaining unconvinced of its likely reality. Holmes’s model, I suggest, is a

credible world. In terms of the conceptual structure I introduced in Sect. 1, this

model relies heavily on substantive assumptions whose truth value is unknown (at

the time it is put forward). However, it generates results which are consistent with

known properties of the real world—properties that other theories cannot explain.

The model is used to support the conjecture (subsequently confirmed) that a

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mechanism similar to that of the model is operating in the real world. Notice that

Holmes’s argument has the same abductive structure as Banerjee’s.

A common theme in many criticisms of the credible worlds approach is to

question the validity of the modes of inference—abduction, or other suspect forms

of induction—that it attributes to modellers’ reasoning. Explicitly or implicitly,

Aydinonat (2007), Cartwright (2009) and Grune-Yanoff (2009) all appeal to tightly-

restricted canons of inductive inference whose effect is to confine modellers within

the structure of argument that characterises the isolation approach, as outlined in

Sect. 1.7 I stand by the arguments of my 2000 paper: this structure of argument is

too restrictive to encompass the inferences that modellers want to make, and are

justified in making.

It may help to explain my position to say that, when I use concepts like

‘justification’, I am not claiming to contribute to the enterprise in which

philosophers of science explicate abstract principles by which claims to knowledge

or belief can be rationally grounded. My approach is both more naturalistic and

more pragmatic. My aim is to investigate the modes of reasoning that economic

theorists use in their work, and to assess whether these are effective in helping them

to understand real economic phenomena.8 Since we all find it necessary to use

inductive inferences in our everyday lives, it should not be surprising to find that

these are part of the practice of science too—however problematic they may for

professional logicians.

6 Models as Isolating Tools

Cartwright (1998, 2002) offers a different account of the role of models in

economics, dovetailing with her conception of the nature of scientific knowledge.

For Cartwright, the world as we confront it ‘‘is for the most part both messy and

arbitrary and not the sort of thing about which the kind of knowledge we call

scientific is possible’’ (2002, p. 137). Scientific laws—invariant associations

between events—are not the fundamental fabric of nature. Laws operate only in

very special circumstances, in which particular causal factors work together in

particular configurations, isolated from other disturbing factors. Science works by

discovering or constructing such configurations or nomological machines. In the era

of Galileo and Newton, the solar system served as a natural nomological machine

7 Cartwright (2009) is particularly uncompromising in her rejection of what she sees as ungrounded

inductive arguments. Most commentators on Schelling’s model accept that the mechanism it exhibits is

highly robust in the domain of models (see, for example, the literature survey in Aydinonat 2007).

Cartwright disagrees, on the following grounds. Given Schelling’s basic assumption that individuals

prefer not to live in neighbourhoods in which their own colour is significantly outnumbered, segregated

neighbourhoods evolve; this result is robust to different specifications of the space in which they interact.

But if instead we assume that individuals always prefer more integration to less and are indifferent

between being in the majority and being in the minority, the resulting patterns of segregation or

integration are different for different specifications of the space (Pancs and Vriend 2007). Since this latter

assumption is wholly different from Schelling’s, and leads to a very different system of dynamics, I

cannot see how Schelling’s conjectures are called into question.8 In this respect too, my approach is similar to Giere’s: see, e.g., Giere (1988, pp. 1–12, 22–28).

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for the study of gravity. Galileo’s experiments with inclined planes exemplify the

use of a constructed nomological machine. Cartwright argues that models in

economics serve the same purpose for the study of capacities in the economic world,

and proposes the following account of how we can use models to learn about

capacities:

For the model to succeed in showing that a factor C has the capacity to

produce E we must be in a position to argue that (a) the specific features

incorporated into the model do not interfere with C in its production of E…Beyond that, (b) these features must be detailed enough for it to be

determinate whether E occurs or not; and (c) they must be simple enough so

that, using accepted principles, we can derive E. Finally, and most difficult to

formulate, (d) the context must be ‘neutral’ to the operation of C, allowing E

to be displayed ‘without distortion’…If conditions (a) to (d) are satisfied, we

may say that we have a theoretically grounded hypothesis about the capacity.

The capacity would be expected to be stable across the range of circumstances

where the general principles and the assumptions about interference and

neutral context are valid (1998, pp. 45–48).

It is crucial to this account that a model purports to isolate a mechanism which,

given the right initial conditions, operates in the world at large. By this, I do not

mean merely that the model exhibits this mechanism working in isolation in an

imaginary world, while leaving open the question of whether any similar

mechanism operates (perhaps alongside others) in the real world. For example, it

seems uncontroversial that Banerjee’s model exhibits a herding mechanism in the

sense that it describes a world in which such a mechanism is at work, and that the

model has been constructed to exclude many other mechanisms that might operate

in the real world.9 Cartwright intends more than this. For her, the function of a

model is to demonstrate the reality of a capacity by isolating it—just as Galileo’s

experiment demonstrates the constancy of the vertical component of the acceler-

ation of a body acted on by gravity. Notice how Cartwright speaks of showing thatC has the capacity to produce E, and of deriving this conclusion from acceptedprinciples. A satisfactory isolation, then, allows a real relationship of cause and

effect to be demonstrated in an environment in which this relationship is stable. In

more natural conditions, this relationship is only a latent capacity which may be

switched on or off by other factors; but the capacity itself is stable across a range of

possible circumstances. Thus, the model provides a ‘‘theoretical grounding’’ for a

general hypothesis about the world.

As an example of this kind of modelling, consider the mathematical models that

structural engineers use when designing buildings. These models represent (what

from an engineering perspective are) the most relevant features of structures in a

form which allows the application of well-established engineering principles, such

as those of Newtonian mechanics. The conclusions that are derived are theoretically

grounded in Cartwright’s sense (they have been derived by valid reasoning from

9 I take Maki (2009) to be using the concept of ‘isolation’ in this weaker sense when he says that, in his

‘‘MISS’’ account, models are depicted ‘‘in terms of isolations and idealisations’’.

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accepted principles), while being true only in an other-things-being-equal sense. For

example, some kinds of engineering model can show that a structure will support

itself without collapsing under its own weight, while saying nothing about whether

it would survive the vibration of an earthquake. A model of this kind can plausibly

be understood as a tool for discovering capacities that operate in the real world.

But if we try to interpret Banerjee’s paper in terms of this account of models, we

hit what I think is a fatal problem: Banerjee does not propose any explicit, general

hypothesis about the world. As I show in my 2000 paper, the same is true of

Akerloff’s and Schelling’s arguments. If the whole point of model-building is to

ground hypotheses about capacities, why do these celebrated exercises in modelling

not tell the reader what hypotheses are being grounded?

The most obvious answer is that these models cannot be used to ground

hypotheses in the way that Cartwright’s account of modelling requires. Just about

all the significant features of Banerjee’s model are ones that he has chosen to

impose; they are not (as the principles of mechanics are) accepted principles about

empirical reality. The conclusions that can be derived from Banerjee’s model, using

standard principles of deductive logic, are not hypotheses but theorems.

Cartwright (2009) recognises that this is a characteristic feature of economic

models, but thinks that this fact counts against economics rather than against her

account of modelling. Maintaining that ‘‘[i]deally besides the specific description of

the cause whose capacities we study, the only premises in use [in a model] should be

general principles and assumptions that guarantee that the experiment is indeed

Galilean’’ (Sect. 4), she concludes that it is ‘‘especially troubling’’ for economics

that there are so few ‘‘acceptable principles’’ of the required kind (Sect. 1).

Similar problems arise, if not quite so starkly, if we try to apply Cartwright’s

account to MSP’s Hawk–Dove model. Unlike Banerjee, MSP do propose a general

hypothesis about the world, namely that in nature, asymmetric animal contests are

usually resolved conventionally. But the ‘‘emergence’’ of this hypothesis from the

model hardly satisfies Cartwright’s conditions for a satisfactory theoretical

grounding. The Hawk–Dove model does make use of some accepted principles of

biology—the principles of Darwinian natural selection. But the workings of those

principles are explored in a counterfactual world created by MSP. Many of the

features that have been built into that world—for example, asexual reproduction and

the entirely genetic determination of behaviour—seem to be modelling conventions

rather than accepted principles or neutral specifications of ‘context’. This makes it

hard to make sense of the idea that the model isolates an other-things-being-equal

tendency that is at work in real-world cases such as that of the swallowtail

butterflies. Suppose one tries to find a general description of the mechanism that

generates MSP’s results. My attempts end up with propositions such as the

following: ‘‘In any two-player game with the Hawk–Dove payoff structure and in

which there is common knowledge of an uncorrelated asymmetry, there are exactly

two ESSs, each of which uses the asymmetric cue to resolve the conflict’’. Such

propositions do not describe real causal mechanisms that can be discovered by

simulating Galilean experiments: they are theorems that are true by virtue of the

principles of mathematics and logic.

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There are interesting parallels between the Hawk–Dove model and one of

Cartwright’s (1998, 2002) favourite examples of economic modelling—the labour-

market model constructed by Christopher Pissarides (1992). Pissarides’s model, like

the Hawk–Dove model, is used to support a general hypothesis about the real world.

Pissarides presents his model as an explanation of the persistence of negative

‘‘employment shocks’’. The essential idea is that workers’ skills deteriorate during

episodes of unemployment, and that a deterioration in the average skill level makes

firms less willing to create jobs in subsequent periods. The model is a complex

structure of inter-related components—overlapping generations of workers, a

random process for matching potential workers to jobs, Nash bargaining between

matched workers and firms, and so on. Pissarides shows that, within this model,

employment shocks can persist. Cartwright sees the complexity of Pissarides’s

model as supporting her thesis that models are nomological machines: ‘‘That is the

trick of building one of these economic models: you have to figure out some

circumstances that are constrained in just the right way that results of interest can be

derived deductively’’ (2002, p. 147).

Unlike Banerjee, Pissarides ends his paper with a section devoted to ‘‘empirical

implications’’. He presents this part of the paper as ‘‘going beyond’’ the highly

stylised model in which the result was derived; it describes ‘‘the empirical model

that is implied by the analysis [of the theoretical model]’’ (p. 1387). This empirical

model is a system of two equations, expressing relations between labour-market

variables such as unemployment, vacancies and search intensity. The idea is that the

empirical model can be estimated econometrically, using data from real labour

markets; by these means, its real-world explanatory power can be tested. On

Cartwright’s account, Pissarides’s empirical model is the general hypothesis that is

grounded in the theoretical model.

The difficulty here is with the idea of ‘‘grounding’’. Or, to put this another way,

it is with fulfilling Cartwright’s condition (d). The array of assumptions that

specify the theoretical model are, as Cartwright says, configured to allow the

persistence result to be derived. But the empirical model is intended to be

estimated using data from real labour markets, in which those assumptions are

clearly not satisfied. The empirical model treats the real labour market as if it

were the labour market of the model. If the empirical model is to inherit the

deductive grounding of the theoretical results, we need some way of demonstrat-

ing that a result that has been derived under a particular set of finely-tuned

assumptions holds in the messy conditions of the real world. Of course, it would

be nice to be able to do this: as Cartwright puts it, ‘‘we want our treatments to be

rigorous and our conclusions to follow deductively’’ (2002, p. 147). But wanting

something does not make it possible.

When Pissarides speaks of ‘‘going beyond’’ the theoretical model, I take him to

be saying that this step involves something less strict than deduction. The sense in

which the empirical model is grounded on the theoretical one might be expressed by

saying that the one is inspired by the other, or that the theoretical model gives us

some grounds for confidence in the implications of the empirical one. I cannot see

what more can be said than this.

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7 Social Mechanisms

The difficulty of justifying such steps of argument might be avoided altogether by

claiming that theoretical models do not tell us anything about the real world. It

might be said that a model tells us only that if a certain set of conditions—those built

into the specification of the model—were to hold, then a certain set of effects—the

‘results’ of the model—would occur. Of course, empirical propositions can be stated

as material implications with the if…then…form; and if models are understood as

isolating tools, this is just the kind of empirical proposition that they will generate.

(For example: If a body is placed on a frictionless inclined plane at the surface of the

earth, the vertical component of its downward acceleration will be 9.8 m/s2.) But if

all the specifications of the model are included in the if…part of a proposition, that

proposition is not a material implication whose truth is a matter of contingency; it is

a necessarily true theorem. There is a sense in which such propositions can be read

as asserting the possibility of particular mechanisms or capacities, but only if

‘possible’ is interpreted as ‘conceivable’ or ‘logically possible’, rather than as

supporting a belief or conjecture about the real world. To interpret models as

generating theorems is to treat modelling as conceptual exploration. As I have

already said, my observations have led me to the conclusion that many economic

theorists do think of modelling in this way.

Aydinonat (2007) and Grune-Yanoff (2009) both propose this kind of

interpretation of Schelling’s model, arguing that it is intended only to tell us about

what effects would occur, were all the assumptions of the model to hold. de Donato

Rodrıguez and Zamora Bonilla (2009, Sect. 4) propose a similar interpretation of

Akerlof’s model, arguing that it is intended only to show ‘‘how to model’’ a class of

market situations and to point the direction for a new research programme. As I

acknowledge in my 2000 paper, there are passages in Schelling’s and Akerlof’s

texts which suggest that they are inclined to favour this interpretation of their own

work. The same might be said of MSP’s remark, quoted in Sect. 3, that ‘‘it is no part

of our argument that differences in pay-off and RHP do not exist, only that they

need not exist for contests to be settled conventionally’’. My claim, the supporting

arguments for which are in my 2000 paper, is that these authors’ extensive

discussions of real-world evidence make sense only if they believe that their models

are capable of telling us something, however speculative, about the real world.

Given the role that his checkerboard model has come to play in methodological

discussion, it is particularly interesting to consider Schelling’s (2006, pp. 235–248)

own methodological account of ‘‘social mechanisms’’. He gives the following

definition: ‘‘[A] social mechanism is a plausible hypothesis, or set of plausible

hypotheses, that could be the explanation of some social phenomenon, the

explanation being in terms of interactions between individuals, or between

individuals and some social aggregate’’ (p. 236). His main example is the logistic

function. Many dynamic phenomena follow logistic curves. Examples include the

spread of infectious diseases and the diffusion of new technologies. The logistic

function itself is not a social mechanism (it is just a mathematical expression). Nor

is the fact that certain data fit a logistic curve (that is just an unexplained fact). But

this fact ‘‘invites explanation’’ in terms of a social mechanism. Schelling takes the

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example of an observed logistic relationship for the sales of a novel. He asks us to

consider a mechanism in which a population of individuals are in one of two

states—‘infected’ people who have read the book and ‘uninfected’ people who have

not. When an infected individual comes into contact with an uninfected one, there is

some probability that the latter becomes infected. If contact between individuals is

random, the relative frequency of infection over time follows a logistic curve. Thus,

the mechanism generates a pattern similar to that found in the sales data: ‘‘it is a

mechanism that can account for what we have observed’’ (pp. 236–238).

Schelling then asks what we gain by proposing social mechanisms as

explanations for empirical regularities. Among his answers is the following:

‘‘[O]nce we see the mechanism, how it works, and maybe its mathematical shape,

we have a kind of template that may fit other phenomena’’ (p. 240). This is clearly

true of the infection mechanism which generates the logistic function. As another

example, Schelling refers to the predator-prey relationships in ecology modelled by

the Lotka-Volterra equations. It is easy to think of further examples of mathematical

structures which apply to a wide range of real-world phenomena by virtue of

similarities in underlying mechanisms. I would nominate the concept of mixed-

strategy equilibrium in games, apparently first discovered by John von Neumann in

relation to bluffing in poker. Schelling is too modest to say this, but the mechanism

of his segregation model undoubtedly fits the bill. So do Akerloff’s ‘lemons’

mechanism, Banerjee’s herding mechanism, and the mechanism displayed in MSP’s

Hawk–Dove model, by which games of conflict are resolved by asymmetric cues.

Notice that Schelling presents the process of discovering mechanisms as

beginning with an attempt to explain previously observed empirical regularities—to

‘‘account for what we have observed’’. That fits with my 2000 reading of his

segregation model as supporting the conjecture that real-world segregation is caused

by a mechanism something like that of the checkerboard model. (Again, the support

comes by way of abductive inference.) But Schelling’s discussion of mechanisms as

templates implies that a model can be useful in domains that are far removed from

the one for which the model was first designed. If that is so, does it really matter

whether the model, when first presented, is credible as an explanation of anything in

particular? For example, take the case of mixed-strategy equilibrium. The

usefulness of this concept in explaining phenomena in economics does not depend

on whether von Neumann’s analysis of poker gives a satisfactory explanation of the

behaviour of poker players. What matters, one might say, is that von Neumann

characterised a social mechanism which turned out to underlie a wide range of

empirical regularities, most of which he had probably never even thought of. So

what is wrong with presenting a model only as a template, without claiming actually

to explain anything?

The most obvious objection is that this makes things too easy for theorists.

Consider an analogy: would you buy a tool from a salesperson who assured you that

it was likely to be useful to you around the home, but couldn’t specify any way of

actually using it? This analogy might suggest that, when a theorist makes links

between a model and the real world, these links are merely selling points. By this I

mean that the methodological status of the model is as conceptual exploration: what

is being offered is a theoretical tool, not an explanation of any particular real-world

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phenomena. To demonstrate the potential usefulness of the tool, however, the

modeller is expected to provide some suggestions about the kind of uses to which it

might be put. I have to say that many economic theorists do seem to think of their

models in this way: they see their conceptual exploration as the serious content of

their work, and the rest as a form of marketing.

At first sight, an account of this kind might seem to explain how theorists can

present their models in relation to familiar real-world phenomena (prices of used

cars, racial segregation in American cities, the relative popularity of different

restaurants) while being so imprecise about what the models tell us about these

phenomena. But, even if we are willing to allow a model to be accepted as valuable

in the absence of any known useful application, this account runs into a problem. If

there is to be a genuine demonstration of the potential usefulness of a theoretical

tool, we have to be shown that it works. Continuing with the analogy, think of the

old-style vacuum-cleaner salesman who scatters dirt on the carpet and then shows

how successfully his product can clean up the mess. If this demonstration is to be at

all convincing, the would-be buyer has to believe that the dirt is real dirt and the

cleaning is real cleaning. Similarly, if the theorist is offering a tool that is intended

to be used in explaining real-world phenomena, a convincing demonstration must

display the tool explaining something. Just as the salesman’s dirt is a contrived

cleaning problem, chosen to engage the attention of the would-be buyer, so the

theorist might choose as the focus of her demonstration some phenomenon that will

attract the attention of her readers. (For the academic economists whose attention

Banerjee is seeking, choice among restaurants and choice among research topics are

presumably engaging topics.) But the theorist still has to produce a real explanation

of the phenomenon.

My starting point was a puzzling feature of papers which report exercises in

economic (and biological) modelling: that authors typically say very little about

how their models relate to the real world. It seems to be seen as sufficient to describe

the properties of the model world in parallel with those of the real world, and to

point to similarities between the two. The most natural interpretation of this practice

is that, in the relevant scientific community, this counts as explanation. If this

interpretation is correct, we can understand why theorists who are demonstrating the

usefulness of the modelling tools they have invented can do so while saying very

little about how their models relate to the real-world phenomena that figure in the

demonstrations. But if not, not.

I have suggested that one should be sceptical whenever a theorist claims to have

discovered a significant social mechanism, but is unable to give a concrete example

of how that mechanism can be part of an explanation of some real-world

phenomenon; and I stand by that. In the light of Schelling’s argument about social

mechanisms, however, I cannot claim that theorists who make such claims are

necessarily committing methodological errors or failing to act in good faith. It is just

that the approach of looking for significant mechanisms while not trying to explain

anything in particular seems unlikely to be productive.

But in any case, such an approach can do no more than define a demarcation

between the job descriptions of theoretical and applied researchers. Perhaps a

theorist is entitled to present a model in the hope that it will prove useful, without

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being able to say how. Still, a model cannot prove useful unless someone uses it,

and whoever that person is, he or she will have to bridge the gap between model

world and real world. Pissarides’s work illustrates this point. Within the conventions

of economics, Pissarides the theorist might well have ended his paper without

including the section on ‘‘empirical implications’’. That shorter paper might have

been understood as a contribution to economic theory, not making any specific

claims about real labour markets. But if we then try to imagine how that model

could be used, we find we need someone to do what Pissarides the applied

economist starts to do under the heading of ‘‘empirical implications’’—namely, to

advance the hypothesis that some part of the real world works like the model. And if

the model is supposed to give us confidence in that hypothesis, we are entitled to ask

how it does so. There is still a gap to be crossed, and that requires inductive

inference.

Acknowledgements Previous versions of this paper were presented at a symposium on economic

models at the 2006 Philosophy of Science Association conference in Vancouver and at a workshop on

‘‘Models as Isolating Tools or as Credible Worlds?’’ at the University of Helsinki in 2008. I thank

participants in those meetings, and Emrah Aydinonat and an anonymous referee, for comments. The idea

of using Banerjee’s model as an illustration was suggested by Maya Elliott. My work was supported by

the Economic and Social Research Council of the UK (award no. RES 051 27 0146).

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