Models, realism and market process

Abstract

We will argue that the common contrast between Neoclassical models and Austrian School is not such, if it is assumed Friedman’s 1953 text, Musgrave’s (1981), and Mäki’s MISS account of models (Models as Isolations and credible Surrogate Systems). In this context the theory of market process might be understood as the model of the Austrian School of Economics, considering the model structure: “if such and such assumptions, then…”. The assumptions would be: a) prices, b) free market, and c) the tendency to learning. We may formulate the model in this way: “if there are prices, free market, and tendency to learning, then the market tends towards coordination” (Zanotti & Borella, 2015). The theory of market process might take part in the discussion on how realistic these assumptions are. We will point out meaningful similarities between the notion of pattern prediction developed in Hayek (1964) and the notion of model (Borella, 2021). To show the relevance of the ontological bases for the assessment of the realism of models, we will introduce the philosophical foundation of spontaneous order. Once more, Hayek seems to have brought the Austrian School closer to the debate over realism of economic models.