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The Foundations of Positive and Normative EconomicsA Hand Book$
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Andrew Caplin and Andrew Schotter

Print publication date: 2008

Print ISBN-13: 9780195328318

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195328318.001.0001

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The Seven Properties of Good Models

The Seven Properties of Good Models

Chapter:
(p.292) Chapter 12 The Seven Properties of Good Models
Source:
The Foundations of Positive and Normative Economics
Author(s):

XAVIER GABAIX

DAVID LAIBSON

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195328318.003.0012

Models are significant as they are used to provide a supposedly reliable description or representation of the world. Most of the models that scientists attempt to generate and analyze are based on assumptions that are only believed to be true since such models would not consider irregularities and inconsistencies with common theory. This chapter introduces seven key properties, whether they already be widely accepted or have yet to be accepted at all, that a good economic model should possess: 1) parsimony, 2) tractability, 3) conceptual insightfulness, 4) generalizability, 5) falsifiability, 6) empirical consistency, and 7) predictive precision. For this analysis, it is argued that classical optimization assumptions are not necessary in coming up with economic models, and that these should be regarded as hypotheses that require testing.

Keywords:   model, description, representation, parsimony, tractability, conceptual insightfulness, generalizability, falsifiability, empirical consistency, predictive precision

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