Economic modelling – Beyond isolation and construction. The case of Austrian Business Cycle Theory as presented by Roger Garrison

Abstract

AbstractThe paper explores the nature of economic models. It is claimed that accounting for it along the isolationism-constructivism line is untenable. A more integrated approach is needed, based on the pragmatist philosophical tradition, focussing rather on the modelling process than on the narrower notion of the model. This argument is backed by a case study: analysis of the Austrian Business Cycle Theory (ABCT) as presented by Roger Garrison, which, as is argued, does not fully fit either the isolationist or the constructivist account of models. It is primarily shown by revealing the fact that learning about the world by using ABCT is not of deductive nature. Therefore, even in the presence of such a strong realistic methodology as the one in the Austrian economics, models used by its adherents are not necessarily perfect isolations. At the same time, this realistic methodology is not in line with the constructivist approach in model-building. The paper should be understood as an exercise in philosophy of economics, namely as an attempt at better understanding of various aspects of economics (here it is models and specifically ABCT) by taking the perspective offered by philosophy of science.