ABSTRACT
Many economists will agree that the ultimate goal of economic science is to understand the actual functioning of the economy and, if possible, to use this knowledge for prediction and policy advice. This means that we should have a good understanding of the empirical regularities that describe the behaviour of major economic variables. An important question then is what simple economic models (or theories) might add to empirical research in understanding the economy. The aim of this chapter is to try to clarify the role of (simple) models in economic research. In particular, I will focus on the question of what additional gain might be expected from models that have individualistic foundations.
