Sometimes, scientific models are either intended to or plausibly interpreted as representing nonactual but possible targets. Call this “hypothetical modeling”. This paper raises two epistemological challenges concerning hypothetical modeling. To begin with, I observe that given common philosophical assumptions about the scope of objective possibility, hypothetical models are fallible with respect to what is objectively possible. There is thus a need to distinguish between accurate and inaccurate hypothetical modeling. The first epistemological challenge is that no account of the epistemology of (...) hypothetical models seems to cohere with the most characteristic function of scientific modeling in general, i.e., surrogative representation. The second epistemological challenge is a version of “reliability challenges” familiar from other areas. There is a challenge to explain how hypothetical models could be a reliable guide to what is possible, given that they are not and cannot be compared against their nonactual targets and updated accordingly. I close with some brief remarks on possible solutions to these challenges. (shrink)

In this paper, I draw a parallel between the stability of physical systems and that of economic ones, such as the US financial system. I argue that the use of equilibrium assumptions is central to the analysis of dynamic behavior for both kinds of systems, and that we ought to interpret such idealizing strategies as footholds for causal exploration and explanation. Our considerations suggest multi-scale modeling as a natural home for such reasoning strategies, which can provide a backdrop for the (...) assessment and prevention of financial crises. Equilibrium assumptions are critical elements of the epistemic scaffolding that make up multi-scale models, which we should understand as a means of constructing explanations of dynamic behavior. (shrink)