Nadia Ruiz

In this critique and exploration of Dan Hausman’s 2023 edition of The Inexact and Separate Science of Economics, I focus on his view of economic models as predicate models and his commitment to equilibrium theory. First, I examine whether his account of modeling accurately reflects macroeconomic modeling. Second, I demonstrate that Hausman’s recognition of methodological constraints inherent in microfounded macroeconomic models challenges equilibrium theory as the theoretical framework in economics.

In a number of very influential publications, Epstein and Hoover (among other authors) have recently argued that a thoroughly micro-foundationalist approach towards economics is unconvincing for metaphysical reasons. However, as we show in this article, this metaphysical/social ontological approach to the debate fails to resolve the status of micro-foundations in the practice of economic modelling. To overcome this, we argue that endogenizing a model—that is, providing micro-foundations for it—correlates with making that model more complex. Specifically, we show that models with more micro-foundations tend to have more parameters or variables. This matters, as there are well-established methodological reasons for preferring models with fewer parameters or variables—ceteris paribus. We therefore conclude that, from a practice-based point of view, micro-foundations are only defensible to the extent that they significantly improve the ability of the relevant model to fit the data of interest. In this way, we arrive at a practice-based, methodological reconceptualization of the debate surrounding the need for micro-foundations in economics.

Brian Epstein has recently argued that a thoroughly microfoundationalist approach towards economics is unconvincing for metaphysical reasons. Generally, Epstein argues that for an improvement in the methodology of social science we must adopt social ontology as the foundation of social sciences; that is, the standing microfoundationalist debate could be solved by fixing economics’ ontology. However, as I show in this paper, fixing the social ontology prior to the process of model construction is optional instead of necessary and that metaphysical-ontological commitments are often the outcome of model construction, not its starting point. By focusing on the practice of modeling in economics the paper provides a useful inroad into the debate about the role of metaphysics in the natural and social sciences more generally.