"The point is that all this work USES Dixit-Stiglitz, but it’s not ABOUT Dixit-Stiglitz; D-S is a gadget, a tool that helps you work with the fundamental issues, but you don’t ever want to forget that it is no more than that."
Sunday, July 15, 2012
Krugman explains that models are tools or simplifications that are used to solve a problem. However, the assumptions of the model cannot be used to explain the implications of the model. That would be circular. Gadgets Versus Fundamentals (Wonkish) - NYTimes.com: