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How do professional economists 'judge' how valid or accurate a economic model is? What criteria do they use, and are these criteria objective?
Clearly, we don't know what the truth is. So a model can't be judged based on whether it predicts true things. So how is it judged?
This is a good question with a complex answer. Different models are created with different purposes in mind. As an example, there are qualitative and quantitative models. Qualitative models sacrifice some realism to demonstrate a particular phenomenon in the clearest way possible. Quantitative models sacrifice this clarity to create something more empirically relevant. I once came across this sentence in a paper and I like the way they phrased it: It's from "Optimal Environmental Taxation in the presence of other taxes: General-equilibrium analyses" by Bovenberg and Goulder:
The use of a numerical model enables us to employ a realistic specification of taxes and adopt a fairly detailed representation of production and demand. Our paper thus combines the strength of analytical and numerical approaches: a stylized analytical model uncovers the major mechanisms at play, while a numerical model explores the empirical significance of these mechanisms in a more realistic setting. Despite considerable differences in the complexity of the analytical an numerical models, we find a strong coherence between the two model's results.
Also, there are some models that are purely statistical. There are also some models that are built solely for prediction. In short, there are many more types of models with different purposes. A model should be judged on its purpose.
Also, as for uncovering "the truth." You might consider reading more about causal inference. This is one of the most important parts of econometrics. For starters, read about the method of Instrumental Variables. There are several other questions and answers on this website that deal with this.
