ȁȃǿ Partʺ: Economics“model” means a complete set of equations specific enough to be ready for
econometric estimation, the answer is pretty clearly that the theorist is
not necessarily working with one. He may not want to restrict himself to
any specific model because he believes that suitable ones differ widely in
their details across times and places. Consider a model of our solar system.
For some purposes we are interested in the system’s specific, historically
accidental, features; and for such purposes, a detailed model is necessary.
But for other purposes we want to emphasize propositions of wider appli-
cation, such as those of gravity; and then it would be pointless to be tied
down to a model of a particular solar system.
Similarly in economics, propositions of the sort we hope to develop
may not pertain to an economic system of one specific structure; and then
a specific model may be mere clutter. As Ludwig von Mises once remarked
(orally) about an econometric investigation of the watermelon market,
none of the fundamental propositions of economics depends on the exis-
tence of such a commodity as watermelons. Nor, one might add, does any
depend on the existence of such a country as the United States of America.
In many contexts, by the same token, we are concerned with propo-
sitions applicable widely enough not to stand or fall on the existence of
railroads or labor unions or negotiable certificates of deposit. What sort
of model it may be legitimate to insist on, if on any at all, thus depends
on the purpose at hand, including the conceived scope of the propositions
under investigation.
Ļe investigator might recognize that he cannot produce a mathe-
matical or econometric model with specific details yet wide applicability.
He might be concerned, instead, with the characteristics that any plausi-
bly relevant model would have—if one insists on speaking of models. He
might be seeking Bauer’s “propositions of generality and depth.” Exam-
ples in economics include the principle of diminishing marginal returns,
the law of demand, and the quantity theory of money. Ļey enter into the
construction of widely different specific models. Ļe investigator might
legitimately be more concerned with such propositions themselves than
with one or another of their particular embodiments. Before one can
sensibly construct a model, one must have some idea of what observed
or conjectured or even merely postulated features of reality one is trying
to embody in it. One needs to know what relations of interdependence
or cause and effect one is trying to exhibit. In that sense, propositions
(and the concepts they employ) are logically prior to models. (Kosko
ȀȈȈȂ, pp.ȀȅȄ,ȀȅȈ,ȀȆȆ, makes sensible remarks about models and about