ABSTRACT
This chapter discusses current debate on the limits of economic modeling which has emerged after the unleashing of the global financial crisis. It explores that a discussion can gain helpful insights, especially concerning the limits of modeling exercises, from the philosophical debate on the artistic representation of reality. It contributes to the epistemological discussion taking place in economics by drawing parallels between Susan Sontag's work on the characteristics of photography as a representation of reality and the role of economic models as abstractions of the real. Economic models are abstract representations of reality. Many economists seem to forget this basic fact when analyzing the role of modeling and models as tools of policy advice. In the European Monetary Union the need for fiscal coordination and the risk of asymmetric fiscal policy impulses created a widespread consensus concerning the necessity to restrict fiscal policy within the Union while trying to optimize the monetary policy in the Euro-zone.
