Empiricism holds that observations are all that we have. We cannot penetrate through the observations to the hidden reality which generates these observations. Here is a picture which illustrates the empiricist view of the world:
The wild and complex reality generates signals which we observe using our five senses. The aspects of reality which we can observe are the only things that we can know about reality. The true nature of hidden reality, as it really is, independent of our observations, is unknown and can never be known to us. Influential philosopher Kant calls it the “thing-in-itself”. Noumena is the wild reality, and Phenomena is what we can perceive/observe about the reality. Quote from Encyclopedia Britannica:
Noumenon, plural Noumena, in the philosophy of Immanuel Kant, the thing-in-itself (das Ding an sich) as opposed to what Kant called the phenomenon—the thing as it appears to an observer. Though the noumenal holds the contents of the intelligible world, Kant claimed that man’s speculative reason can only know phenomena and can never penetrate to the noumenon.
Kant was enormously influential in de-railing the philosophy of science (See Kant’s Blunder). Prior to Kant, philosophers understood science in the way we have explained in the beginning: science is about looking through the appearances in order to understand the hidden reality. However, Kant argued that this was an impossible task. All we have is appearances (phenomena), and we cannot look through them to get at the underlying hidden realities (noumena). He proposed that instead of studying the relation between appearances and reality, we should study the relationship between our thought process and the observations of the real world:
It is important to understand Kant, because his way of thinking is at the heart of Economic Modeling today. To get a deeper understanding of Kant, we provide several arguments favoring his views. Think about how a simple computer camera looks at the world. The area being looked at by the camera is represented as a square two-dimensional patch which is say 1000 x 1000 pixels. At each pixel, if the camera detects light, it puts a 1 and if it does not, it puts a 0. So, we end up with a picture of reality which is a 1000 x 1000 matrix of 1’s and 0’s. This is the OBSERVATION. Now how can we translate these observations into a picture of reality? This is the basic problem of computer vision – taking a stream of numerical inputs from the camera and translating it into a picture of reality. For example, a particular stream of 1’s and 0’s may be interpreted as a picture of a tree, by a computer vision program. As human beings, we face a similar problem. We don’t actually see the world out there. What we see is a reflection of the world within our eyes. Our minds process the image on our retina into a picture of the external reality. Before Kant, most people thought that the image in our minds matched the external reality. What Kant said was that we have no way of knowing this. We have no way of knowing the external reality. All we can see is the image of it on our retina, and the interpretation of it in our minds. A Kantian model, which we will label a mental model later, explains how we convert streams of 0’a and 1’s into an image of reality.
For understanding the nature of models, we will need to keep these three things in mind. Reality generates observations. And our minds interpret observations as a picture of reality. Most of us think that the picture in our minds is exactly what the reality is. When I look at a tree, I do not say that my mind has interpreted an image on my retina as a tree. I say that there is a tree out there in external reality which I am seeing. However this is an over-simplified understanding. For example, when I see a mirage, I interpret the image on my retina as water, but in fact there is no water in external reality. Similarly, a fly has a compound eye, and sees the world in way which is very different from how we see it.
As opposed to Kant, traditional philosophy is concerned with the question of how the image we have formed relates to external reality (not to the bitstream of observations). Traditional philosophy would ask: which is the “correct” picture of external reality? What the fly sees or what we see? What Kant says is that there is no way to learn the answer to this question. We have no separate access to external reality apart from our observations. So instead of thinking about whether our mental pictures match true reality, we should think about how we process the stream of sensations we receive into an image (a model) of the world. Favoring Kant, Evolutionary biologists argue that the picture that we see of the world tends to highlight those aspects which matter for our survival, and ignore or neglect those aspects which don’t. This means that the representation of reality that is captured by our senses has less to do with the true external reality, and more to do with our own survival. The point of all this is that the naïve idea that what we see is just a true picture of reality is not necessarily correct.
This idea of Kant, that we can and should abandon looking for truth – the true picture of reality – has had a powerful effect on the philosophy of science today. Especially in economics, models that we build have no relation to reality. Rather the models in use are ways of organizing our own thoughts about reality. This has led to models which are hopelessly bad. Furthermore, the IDEA that we do not need to try to match reality, has led to the impossibility of correcting bad models to make them better. All that happens is that bad models are replaced by more complex models which are even worse. To understand this better, we now discuss three types of models –
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