Economic theory is one of the sciences that most influence everyday life. A bad reform or an erroneous economic measure can have devastating consequences, throwing entire social classes into unemployment or poverty or causing dramatic shortages. Misguided reforms are often suggested by mistaken theories, the same ones that are developed and taught in universities. That's why it's so important to understand the methodology of economics, the philosophical field that studies how economic theories are created, empirically tested, and applied. For example, the idea that in order to be justified a real-world economic policy requires a foray into the unreal world of models does not seem at all bizarre to a professional economist. This use of "unrealistic but useful" models is the first topic to which Francesco Guala devotes his attention: models are a tool for identifying real cause-effect relationships among economic variables and achieving the goal of being useful for forecasting and, especially, controlling economic phenomena. Besides merely predicting future events, in fact, economists must also recommend ways to prevent or modify them. Models, causality, and predictions raise interrelated methodological issues, a bundle of basic questions that the author addresses in a clear, accessible manner in this book.
Francesco Guala teaches Philosophy at the University of Exeter and is the author of The Methodology of Experimental Economics (Cambridge University Press, 2005).