Causal Relations via Econometrics

Applied econometric work takes a superficial approach to causality. Understanding economic affairs, making good policy decisions, and progress in the economic discipline depend on our ability to infer causal relations from data. We review the dominant approaches to causality in econometrics, and suggest why they fail to give good results. We feel the problem cannot be solved by traditional tools, and requires some out-of-the-box thinking. Potentially promising approaches to solutions are discussed.causality, regression, Granger Causality, Exogeneity, Cowles Commission, Hendry Methodology, Natural Experiments

Causal Relations via Econometrics

Applied econometric work takes a superficial approach to causality. Understanding economic affairs, making good policy decisions, and progress in the economic discipline depend on our ability to infer causal relations from data. We review the dominant approaches to causality in econometrics, and suggest why they fail to give good results. We feel the problem cannot be solved by traditional tools, and requires some out-of-the-box thinking. Potentially promising approaches to solutions are discussed.Causality, Regression, Exogeneity, Hendry Methodology, Natural Experiments

The ghosts I called I can\u27t get rid of now : The Keynes-Tinbergen-Friedman-Phillips Critique of Keynesian Macroeconometrics

This chapter offers a fresh perspective on the much publicised dispute between those followers of Keynes who presented econometric evidence in favour of a Phillips curve trade-off, and those monetarists who presented counter econometric evidence. Contrary to common perceptions, the collapse of the Keynesian Phillips curve was a vindication of a common critique of macroeconometric practices, which was jointly authored by John Maynard Keynes, Jan Tinbergen, Milton Friedman and A.W.H. \u27Bill\u27 Phillips. This analysis is informed by the usual sources, plus two sources which had been thought to be no longer in existence (Phillips\u27 private papers and the London School of Economics (LSE) Methodology, Measurement and Testing (M2T) Staff Seminar records), plus two essays by Keynes (1938a, 1938b) which have been overlooked in this context. ISBN: 033373045

Dr. Keynes: Economic Theory in a Diagnostic Science

In his own view, economic theory was important to Keynes’s work as an economists. Aside from the General Theory, most of his economic writings, however policy oriented make explicit reference to theory. Nevertheless, Keynes’s theoretical style is so far from what contemporary economics regards as “theory” that some have dismissed Keynes as a theorist altogether or thought of him as a theorist hampered by the lack of modern mathematical tools. In this paper, I argue to the contrary that Keynes’s theoretical style is conditioned by a conception of theory as a diagnostic tool. This is a natural development from Marshall, and conceptually very different from modern macroeconomists. It is nonetheless a very attractive conception of the place of theory in economics.general theory, economics, contemporary

Forecasting with Econometric Methods: Folklore versus Fact

Evidence from social psychology suggests that econometricians will avoid evidence that disconfirms their beliefs. Two beliefs of econometricians were examined: (1) Econometric methods provide more accurate short-term forecasts than do other methods; and (2) more complex econometric methods yield more accurate forecasts. A survey of 21 experts in econometrics found that 95% agreed with the first statement and 72% agreed with the second. A review of the published empirical evidence yielded little support for either of the two statements in the 41 studies. The method of multiple hypotheses was suggested as a research strategy that will lead to more effective use of disconfirming evidence. Although this strategy was suggested in 1890, it has only recently been used by econometricians

Representation in Econometrics: A Historical Perspective

Measurement forms the substance of econometrics. This chapter outlines the history of econometrics from a measurement perspective - how have measurement errors been dealt with and how, from a methodological standpoint, did econometrics evolve so as to represent theory more adequately in relation to data? The evolution is organized in terms of four phases: 'theory and measurement', 'measurement and theory', 'measurement with theory' and 'measurement without theory'. The question of how measurement research has helped in the advancement of knowledge advance is discussed in the light of this history.Econometrics, History, Measurement error

Can econometric analysis make (agricultural) economics a hard science? Critical remarks and implications for economic methodology

This paper argues that mainstream economics does not follow the positivist research tradition it (often implicitly) claims to follow and expresses some serious doubt that econometrics in particular can make economics a hard science. Mathematical rigour and sophisticated statistical techniques may be regarded as persuasive analytical tools in economics, but their mere application does not guarantee good research practice. The paper outlines an alternative methodological view of pragmatic instrumentalism in which the well known tools of economic analysis can find a new place. Instead of relying on a narrow rule that purports to produce universal truth, this view encourages to increase the target area for questioning and probing. Much more attention is paid to the communicative aspects of scientific methodology – in which terms an analysis is framed, and under what conditions, to whom, by whom, and by which means it is articulated. -- Der Beitrag vertritt den Standpunkt, dass die Wirtschaftswissenschaften nicht der positivistischen Forschungstradition folgen, der sie (oft implizit) vorgeben zu folgen. Darüber hinaus wird Zweifel geäußert, dass die Ökonometrie im Besonderen in der Lage ist, die Ökonomie zu einer harten Wissenschaft zu machen. Mathematische Stringenz und anspruchsvolle statistische Verfahren mögen als überzeugende Analyseinstrumente der Ökonomie gelten, allein ihre Anwendung garantiert jedoch noch keine gute Forschungspraxis. Der Beitrag skizziert eine alternative Betrachtungsweise, die einem pragmatischen Instrumentalismus folgt und in der die bekannten Instrumente der ökonomischen Analyse einen neuen Platz finden können. Anstatt auf eine enge Regel zu vertrauen, die vorgibt, universelle Wahrheiten hervorzubringen, sollte die Zielfläche für das Hinterfragen und Nachforschen vergrößert werden. Wesentlich mehr Aufmerksamkeit wird den kommunikativen Aspekten wissenschaftlicher Arbeit gewidmet ? mit Hilfe welcher Begriffe eine Analyse vorgenommen wird, und unter welchen Bedingungen, im Hinblick auf wen, durch wen und auf welche Weise sie artikuliert wird.Methoden der Wirtschaftswissenschaften,Ökonometrie,Wissenschaftstheorie,pragmatischer Instrumentalismus,economic method,econometrics,philosophy of science,pragmatic instrumentalism