Lars P. Syll — Applying real-world filters to economic models

Paul Pfleiderer quote on corroborating economic models using what he calls "real-world filters."

Being logically correct may earn a place for a theoretical model on the bookshelf, but when a theoretical model is taken off the shelf and applied to the real world, it is important to question whether the model’s assumptions are in accord with what we know about the world. Is the story behind the model one that captures what is important or is it a fiction that has little connection to what we see in practice? Have important factors been omitted? Are economic agents assumed to be doing things that we have serious doubts they are able to do? These questions and others like them allow us to filter out models that are ill suited to give us genuine insights. To be taken seriously models should pass through the real world filter....

Applying real-world filters to economic models

Lars P. Syll | Professor, Malmo University