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Roy W. has beaten me to the punch with his mention of the
Morgan and Morrison book on modelling, which I highly
recommend to those interested in the relation between models,
theories and empirical data. The book also has several excellent
case studies in the historical explanation of model building in
economics and the natural sciences.
The conversation on this thread has moved quickly from the
historical question of when the notion of perfect knowledge was first
employed to other issues (some of which were, of course, included
in the original posting). While I don't think that historical and
philosophical questions are unrelated, it seems to me that
providing a philosophical justification for the place of the perfect
knowledge assumption in economic theory is not the same as
providing a historical account of how the notion came to be
adopted, and how it was used not only by its initial users but by
later economists.
For example, let's presume that the notion of "perfect knowledge"
enters economics in the first part of the twentieth century and that
Knight played an important role in its adoption. Now, Knight
provides a philosophical justification for the adoption of the
assumption which is quite similar to that suggested by others in
this thread, both in what Patrick Gunning calls its "simplifying" and
its "counterfactual" aspects. But there is more to Knight's adoption
and propogation of the assumption than its philosophical and
economic arguments. Knight layers these arguments on top of
notions of knowledge emerging in the early 20th century in
psychology, combines them with his interests in causality and
probability theory, axiomatizes them because of his background in
the sciences, and aims them at both his economic and ideological
opponents. Understanding Knight's use of the term "perfect
knowledge", therefore, requires a "thick" explanation. I would
presume that a similarly thick explanation would be required to
explain later uses of the assumption (although I would agree with
Robert and Patrick that, in any scientific discipline, assumptions
become codified and normalized and therefore their use becomes
less problematic to the practitioner).
So I would frame the questions this way: can we explain how the
"perfect knowledge" assumption was employed during the early
20th century, why it came to be employed in that way, how its new
role was different than the role of previous notions of human
knowledge in economic theory, and how its role evolved?
Hints of answers to these questions have already been suggested
in this conversation thread. I'll mention the ones I remember, plus a
few others: new understandings of what it means to do science; a
raging battle over economic theory on many fronts with unclear
battle lines; interest in the relation between cognitive psychology,
the theory of knowledge, and economic action; new mathematical
techniques; the emergence of American Pragmatism; and an
increased role for economists in public service.
Ross Emmett
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