Explanation, understanding, and unrealistic models

How can false models be explanatory? And how can they help us to understand the way the world works? Sometimes scientists have little hope of building models that approximate the world they observe. Even in such cases, I argue, the models they build can have explanatory import. The basic idea is that scientists provide causal explanations of why the regularity entailed by an abstract and idealized model fails to obtain. They do so by relaxing some of its unrealistic assumptions. This method of 'explanation by relaxation' captures the explanatory import of some important models in economics. I contrast this method with the accounts that Daniel Hausman and Nancy Cartwright have provided of explanation in economics. Their accounts are unsatisfactory because they require that the economic model regularities obtain, which is rarely the case. I go on to argue that counterfactual regularities play a central role in achieving 'understanding by relaxation.' This has a surprising implication for the relation between explanation and understanding: Achieving scientific understanding does not require the ability to explain observed regularities. (C) 2012 Elsevier Ltd. All rights reserved.