Krugman and Stiglitz — nothing but neoliberal alibis

31 January, 2017 at 20:40 | Posted in Economics | Comments Off on Krugman and Stiglitz — nothing but neoliberal alibis

Mirowski’s concern to disabuse his readers of the notion that the wing of neoliberal doctrine disseminated by neoclassical economists could ever be reformed produces some of the best sections of the book. His portrait of an economics profession in haggard disarray in the aftermath of the crisis is both comic and tragic …

verso_978-1-781683026_never_let_a_serious_crisis__pb_edition__large_300_cmyk-dc185356d27351d710223aefe6ffad0cLittle in the discipline has changed in the wake of the crisis. Mirowski thinks that this is at least in part a result of the impotence of the loyal opposition — those economists such as Joseph Stiglitz or Paul Krugman who attempt to oppose the more viciously neoliberal articulations of economic theory from within the camp of neoclassical economics. Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis … Mirowski argues that their attempt to do so while retaining the basic theoretical architecture of neoclassicism has rendered them doubly ineffective.

First, their adoption of the battery of assumptions that accompany most neoclassical theorizing — about representative agents, treating information like any other commodity, and so on — make it nearly impossible to conclusively rebut arguments like the efficient markets hypothesis. Instead, they end up tinkering with it, introducing a nuance here or a qualification there. This tinkering causes their arguments to be more or less ignored in neoclassical pedagogy, as economists more favorably inclined toward hard neoliberal arguments can easily ignore such revisions and hold that the basic thrust of the theory is still correct. Stiglitz’s and Krugman’s arguments, while receiving circulation through the popular press, utterly fail to transform the discipline.

Paul Heideman

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Neoliberalism — a threat to democracy

31 January, 2017 at 19:02 | Posted in Politics & Society | 3 Comments

 

Perhaps the most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis. As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts. Instead, neoliberal theory asserts, people can exercise choice through spending. But some have more to spend than others: in the great consumer or shareholder democracy, votes are not equally distributed. The result is a disempowerment of the poor and middle. As parties of the right and former left adopt similar neoliberal policies, disempowerment turns to disenfranchisement. Large numbers of people have been shed from politics.
donald-trumpChris Hedges remarks that “fascist movements build their base not from the politically active but the politically inactive, the ‘losers’ who feel, often correctly, they have no voice or role to play in the political establishment”. When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Trump, for example, facts and arguments appear irrelevant.

George Monbiot

On the non-applicability of statistical theory

30 January, 2017 at 19:57 | Posted in Statistics & Econometrics | 1 Comment

Eminent statistician David Salsburg is rightfully very critical of the way social scientists — including economists and econometricians — uncritically and without arguments have come to simply assume that they can apply probability distributions from statistical theory on their own area of research:

9780805071344We assume there is an abstract space of elementary things called ‘events’ … If a measure on the abstract space of events fulfills certain axioms, then it is a probability. To use probability in real life, we have to identify this space of events and do so with sufficient specificity to allow us to actually calculate probability measurements on that space … Unless we can identify [this] abstract space, the probability statements that emerge from statistical analyses will have many different and sometimes contrary meanings …

Kolmogorov established the mathematical meaning of probability: Probability is a measure of sets in an abstract space of events. All the mathematical properties of probability can be derived from this definition. When we wish to apply probability to real life, we need to identify that abstract space of events for the particular problem at hand … It is not well established when statistical methods are used for observational studies … If we cannot identify the space of events that generate the probabilities being calculated, then one model is no more valid than another … As statistical models are used more and more for observational studies to assist in social decisions by government and advocacy groups, this fundamental failure to be able to derive probabilities without ambiguity will cast doubt on the usefulness of these methods.

Wise words well worth pondering on.

As long as economists and statisticians cannot really identify their statistical theories with real-world phenomena there is no real warrant for taking their statistical inferences seriously.

Just as there is no such thing as a ‘free lunch,’ there is no such thing as a ‘free probability.’ To be able at all to talk about probabilities, you have to specify a model. If there is no chance set-up or model that generates the probabilistic outcomes or events – in statistics one refers to any process where you observe or measure as an experiment (rolling a die) and the results obtained as the outcomes or events (number of points rolled with the die, being e. g. 3 or 5) of the experiment – there strictly seen is no event at all.

Probability is — as strongly argued by Keynes — a relational element. It always must come with a specification of the model from which it is calculated. And then to be of any empirical scientific value it has to be shown to coincide with (or at least converge to) real data generating processes or structures – something seldom or never done!

And this is the basic problem with economic data. If you have a fair roulette-wheel, you can arguably specify probabilities and probability density distributions. But how do you conceive of the analogous ‘nomological machines’ for prices, gross domestic product, income distribution etc? Only by a leap of faith. And that does not suffice. You have to come up with some really good arguments if you want to persuade people into believing in the existence of socio-economic structures that generate data with characteristics conceivable as stochastic events portrayed by probabilistic density distributions!

The origins of MMT

30 January, 2017 at 10:53 | Posted in Economics | 2 Comments

Many mainstream economists seem to think the idea behind Modern Monetary Theory is new and originates from economic cranks.

New? Cranks? How about reading one of the great founders of neoclassical economics – Knut Wicksell. This is what Wicksell wrote in 1898 on ‘pure credit systems’ in Interest and Prices (Geldzins und Güterpreise), 1936 (1898), p. 68f:

It is possible to go even further. There is no real need for any money at all if a payment between two customers can be accomplished by simply transferring the appropriate sum of money in the books of the bank 

A pure credit system has not yet … been completely developed in this form. But here and there it is to be found in the somewhat different guise of the banknote system

We intend therefor, as a basis for the following discussion, to imagine a state of affairs in which money does not actually circulate at all, neither in the form of coin … nor in the form of notes, but where all domestic payments are effected by means of the Giro system and bookkeeping transfers. A  thorough analysis of this purely imaginary case seems to me to be worth while, for it provides a precise antithesis to the equally imaginay case of a pure cash system, in which credit plays no part whatever [the exact equivalent of the often used neoclassical model assumption of “cash in advance” – LPS] …

For the sake of simplicity, let us then assume that the whole monetary system of a country is in the hands of a single credit institution, provided with an adequate number of branches, at which each independent economic individual keeps an account on which he can draw cheques.

What Modern Monetary Theory (MMT) basically does is exactly what Wicksell tried to do more than a hundred years ago. The difference is that today the ‘pure credit economy’  is a reality and not just a theoretical curiosity – MMT describes a fiat currency system that almost every country in the world is operating under.

And here’s another well-known economist with early ideas of the MMT variety:

[Bendixen says the] old ‘metallist’ view of money is superstitious, and Dr. Bendixen trounces it with the vigour of a convert. Money is the creation of the State; it is not true to say that gold is international currency, for international contracts are never made in terms of gold, but always in terms of some national monetary unit; there is no essential or important distinction between notes and metallic money; money is the measure of value, but to regard it as having value itself is a relic of the view that the value of money is regulated by the value of the substance of which it is made, and is like confusing a theatre ticket with the performance. With the exception of the last, the only true interpretation of which is purely dialectical, these ideas are undoubtedly of the right complexion. It is probably true that the old ‘metallist’ view and the theories of regulation of note issue based on it do greatly stand in the way of currency reform, whether we are thinking of economy and elasticity or of a change in the standard; and a gospel which can be made the basis of a crusade on these lines is likely to be very useful to the world, whatever its crudities or terminology.

J. M. Keynes, “Theorie des Geldes und der Umlaufsmittel. by Ludwig von Mises; Geld und Kapital. by Friedrich Bendixen” (review), Economic Journal, 1914

In modern times legal currencies are totally based on fiat. Currencies no longer have intrinsic value (as gold and silver). What gives them value is basically the legal status given to them by government and the simple fact that you have to pay your taxes with them. That also enables governments to run a kind of monopoly business where it never can run out of money. Hence spending becomes the prime mover and taxing and borrowing is degraded to following acts. If we have a depression, the solution, then, is not austerity. It is spending. Budget deficits are not the major problem, since fiat money means that governments can always make more of them.

Financing quantitative easing, fiscal expansion, and other similar operations, is made possible by simply crediting a bank account and thereby – by a single keystroke – actually creating money. One of the most important reasons why so many countries are still stuck in depression-like economic quagmires is that people in general – including most mainstream economists – simply don’t understand the workings of modern monetary systems. The result is totally and utterly wrong-headed austerity policies, emanating out of a groundless fear of creating inflation via central banks printing money, in a situation where we rather should fear deflation and inadequate effective demand.

Regression to the mean

30 January, 2017 at 00:28 | Posted in Statistics & Econometrics | Comments Off on Regression to the mean

Regression to the men is nothing but the universal truth of the fact that whenever we have an imperfect correlation between two scores, we have regression to the mean.

The hazards of willfully ignoring uncertainty

29 January, 2017 at 13:16 | Posted in Economics | Comments Off on The hazards of willfully ignoring uncertainty

nate silverWe forget – or willfully ignore – that our models are simplifications of the world …

One of the pervasive risks that we face in the information age … is that even if the amount of knowledge in the world is increasing, the gap between what we know and what we think we know may be widening. This syndrome is often associated with very precise-seeming predictions that are not at all accurate … This is like claiming you are a good shot because your bullets always end up in about the same place — even though they are nowhere near the target …

Financial crises – and most other failures of prediction – stem from this false sense of confidence. Precise forecasts masquerade as accurate ones, and some of us get fooled and double-down our bets.

One of the best examples of this ‘masquerading’ is the following statement by Robert Lucas (Wall Street Journal, September 19, 2007):

uN7GNNaI am skeptical about the argument that the subprime mortgage problem will contaminate the whole mortgage market, that housing construction will come to a halt, and that the economy will slip into a recession. Every step in this chain is questionable and none has been quantified. If we have learned anything from the past 20 years it is that there is a lot of stability built into the real economy.

 

Milton Friedman’s pet theory finally shown to be wrong

28 January, 2017 at 15:36 | Posted in Economics | 7 Comments

150514006_4Milton Friedman’s Permanent Income Hypothesis (PIH) says that people’s consumption isn’t affected by short-term fluctuations in incomes since people only spend more money when they think that their life-time incomes change. Believing Friedman is right, mainstream economists have for decades argued that Keynesian fiscal policies therefore are ineffectual.

As shown over and over again for the last three decades, empirical facts totally disconfirm Friedman’s hypothesis. The final nail in the coffin is new research from Harvard:

Unemployment is a particularly good setting for testing alternative models of consumption because it causes such a large change in family income. A literature starting with Akerlof and Yellen (1985), Mankiw (1985) and Cochrane (1989) has argued that because ignoring small price changes has a second-order impact on utility, a rule of thumb such as setting spending changes equal to income changes may be “near-rational.” More recently, many researchers have documented evidence of an immediate increase in spending in response to tax rebates and similar one-time payments …

We compare the path of spending during unemployment in the data to three benchmark models and find that the buffer stock model fits better than a permanent income model or a hand-to-mouth model …

To summarize, we find that families do relatively little self-insurance when unemployed as spending is quite sensitive to current monthly income. We built a new dataset to study the spending of unemployed families using anonymized bank account records from JPMCI. Using rich category-level expenditure data, we find that work-related expenses explain only a modest portion of the spending drop during unemployment. The overall path of spending for a seven-month unemployment spell is consistent with a buffer stock model where agents hold assets equal to less than one month of income at the onset of unemployment. Because unemployment is such a large shock to income, our finding that spending is highly sensitive to income overcomes the near-rationality critique applied to prior work. Finally, we document a puzzling drop in spending of 11% in the month UI benefits exhaust, suggesting that families do not prepare for benefit exhaustion.

Peter Ganong & Pascal Noel

So — now we know that consumer behaviour is influenced by short-term fluctuations in incomes and that this is true even if consumers know that their situation may well change in the future.

Since almost all modern mainstream macroeconomic theories are based on PIH –standardly used in formulating the consumption Euler equations that make up a vital part of ‘modern’ New Classical and New Keynesian macro models — these devastating findings are extremely problematic.main-qimg-1b106c1df117b1c788bd8f4089d394e3-c

In many modern macroeonomics textbooks one explicitly adapt a ‘New Keynesian’ framework, adding price rigidities and a financial system to the usual neoclassical macroeconomic set-up. Elaborating on these macromodels one soon arrives at specifying the demand side with the help of the Friedmanian Permanent Income Hypothesis and its Euler equations.

But if people — not the representative agent — at least sometimes can’t help being off their labour supply curve — as in the real world — then what are these hordes of Euler equations that you find ad nauseam in these ‘New Keynesian’ macromodels gonna help us?

My doubts regarding macro economic modelers’ obsession with Euler equations is basically that, as with so many other assumptions in ‘modern’ macroeconomics, Euler equations, and the PIH that they build on, don’t fit reality.

In the standard neoclassical consumption model people are basically portrayed as treating time as a dichotomous phenomenon today and the future — when contemplating making decisions and acting. How much should one consume today and how much in the future? The Euler equation used implies that the representative agent (consumer) is indifferent between consuming one more unit today or instead consuming it tomorrow. Further, in the Euler equation we only have one interest rate, equated to the money market rate as set by the central bank. The crux is, however, that — given almost any specification of the utility function – the two rates are actually often found to be strongly negatively correlated in the empirical literature!

From a methodological pespective yours truly has to conclude that these kind microfounded macroeconomic models are a rather unimpressive attempt at legitimizing using fictitious idealizations — such as PIH and Euler equations — for reasons more to do with model tractability than with a genuine interest of understanding and explaining features of real economies. Mainstream economists usually do not want to get hung up on the assumptions that their models build on. But it is still an undeniable fact that theoretical models building on piles of known to be false assumptions — such as PIH and the Euler equations that build on it — in no way even get close to being scientific explanations. On the contrary. They are untestable and hence totally worthless from the point of view of scientific relevance.

Ganong’s and Noel’s research finally shows that mainstream macroeconomics, building on the standard neoclassical consumption model with its Permanent Income Hypothesis and Euler equations, has to be replaced with something else. Preferably with something that is both real and relevant, and not only chosen for reasons of mathematical tractability  or for more or less openly market fundamentalist ideological reasons.

‘Alternative facts’ and voter fraud

27 January, 2017 at 18:53 | Posted in Politics & Society | Comments Off on ‘Alternative facts’ and voter fraud


Oh, horrible, oh, horrible, most horrible!
What a tragedy — and what shame, all those Americans with more than two brain cells must feel today. I do suffer with them through this nightmare.

Smoke on the water

27 January, 2017 at 16:51 | Posted in Varia | Comments Off on Smoke on the water

 

The unsurpassed rock MASTERPIECE.

BTO

27 January, 2017 at 16:28 | Posted in Varia | 1 Comment

 

Successive approximations

27 January, 2017 at 16:20 | Posted in Economics | 1 Comment

In The World in the Model Mary Morgan characterizes the modelling tradition of economics as one concerned with “thin men acting in small worlds” and writes:

Strangely perhaps, the most obvious element in the inference gap for models … lies in the validity of any inference between two such different media – forward from the real world to the artificial world of the mathematical model and back again from the model experiment to the real material of the economic world. The model is at most a parallel world. The parallel quality does not seem to bother economists. But materials do matter: it matters that economic models are only representations of things in the economy, not the things themselves.

Now, a salient feature of modern mainstream economics is the idea of science advancing through the use of ‘successive approximations.’ Is this really a feasible methodology? I think not.

Most models in science are representations of something else. Models ‘stand for’ or ‘depict’ specific parts of a ‘target system’ (usually the real world). All theories and models have to use sign vehicles to convey some kind of content that may be used for saying something of the target system. But purpose-built assumptions made solely to secure a way of reaching deductively validated results in mathematical models – like ‘rational expectations’ or ‘representative actors’ — are of little value if they cannot be validated outside of the model.

All empirical sciences use simplifying or unrealistic assumptions in their modeling activities. That is not the issue – as long as the assumptions made are not unrealistic in the wrong way or for the wrong reasons.

The obvious ontological shortcoming of a basically epistemic — rather than ontological — approach such as ‘successive approximations’ is that ‘similarity’ or ‘resemblance’ tout court do not guarantee that the correspondence between model and target is interesting, relevant, revealing or somehow adequate in terms of mechanisms, causal powers, capacities or tendencies. No matter how many convoluted refinements of concepts made in the model, if the ‘successive approximations’ do not result in models similar to reality in the appropriate respects (such as structure, isomorphism etc), the surrogate system becomes a substitute system that does not bridge to the world but rather misses its target.

So, I have to conclude that constructing ‘minimal’ economic models — or using microfounded macroeconomic models as ‘stylized facts’ or ‘stylized pictures’ somehow ‘successively approximating’ macroeconomic reality — is a rather unimpressive attempt at legitimizing using fictitious idealizations for reasons more to do with model tractability than with a genuine interest of understanding and explaining features of real economies.

Many of the model assumptions standardly made in mainstream economics are restrictive rather than harmless and can not in any sensible meaning be considered approximations at all. Or as May Brodbeck had it:

Model ships appear frequently in bottles; model boys in heaven only.

Why Minsky matters

26 January, 2017 at 20:11 | Posted in Economics | 5 Comments

In an often cynical world, standard financial and macroeconomic quantitative models give people the benefi t of the doubt. Fundamental economic theory assumes the best of us, supposing that human beings are perfectly rational, know all the facts of a given situation, understand the risks, and optimize our behavior and portfolios accordingly. Reality, of course, is quite different. While a significant portion of individual and market behavior can be modeled reasonably well, the human emotions that drive cycles of fear and greed are not predictable and can often defy historical precedent. As a result, quantitative models sometimes fail to anticipate major macroeconomic turning points. The ongoing debt crisis in Europe is the most recent example of an extreme event shattering historical norms.

kindleOnce an extreme event occurs, standard models offer limited insight as to how the ensuing crisis could play out and how it should be managed, which is why policy responses can seem disjointed. The latest policy responses to the European crisis have been no exception. To understand and respond to a crisis like the one in Europe, perhaps we need to consider some new models that include the “human factor.” Economic historian Charles Kindleberger can offer some insight. In his book Manias, Panics, and Crashes, Kindleberger explores the anatomy of a typical financial crisis and provides a framework that considers the impact of the powerful human dynamics of fear and greed. Kindleberger’s descriptive process of the boom and bust liquidity cycle can help shed light on the current European sovereign debt saga, and perhaps illuminate whether we have in fact turned the corner on this financial crisis.

Kindleberger analyzed hundreds of financial crises dating back centuries and found them to share a common sequence of events, one that followed monetary theorist Hyman Minsky’s model of the instability of a credit system. Fundamentally, the more stable and prosperous an economic structure appears, the more leverage and speculative financing will build within the system, eventually making it highly vulnerable to a surprising, extreme collapse. Kindleberger provided the qualitative (as opposed to quantitative!) description of the Minsky Model, shown below, which is a useful snapshot of the liquidity cycle. It can be applied to Europe and any potential boom/bust candidate, including Chinese real estate, commodity prices, or investors’ recent love affair with emerging markets. Kindleberger famously dubbed this sequence a “hardy perennial,” probably because the galvanizing human conditions of fear and greed are more often than not prone to overshoot fundamental values compared to the behavior of a rational individual, which exists only in macroeconomic theory.

ScreenShot2012-03-28at3_24_51PM

Loomis Sayles

hymanFor more on Minsky, listen to BBC 4 where Duncan Weldon explains in what way Hyman Minsky’s thoughts on banking and finance offer a radical challenge to mainstream economic theory.

As a young research stipendiate in the U.S. thirty years ago, yours truly had the great pleasure and privelege of having Hyman Minsky as teacher.

He was a great inspiration at the time.

He still is.

Yours truly föreläser om nyliberalism

26 January, 2017 at 11:12 | Posted in Politics & Society | Comments Off on Yours truly föreläser om nyliberalism

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Smålands Nation
Kastanjegatan 7, Lund
2 februari kl. 18.00-20.00

Don’t let me be misunderstood

26 January, 2017 at 09:39 | Posted in Varia | Comments Off on Don’t let me be misunderstood

 

Donald Trump’s running war on reality

25 January, 2017 at 15:51 | Posted in Politics & Society | Comments Off on Donald Trump’s running war on reality

 

Trump and free trade

25 January, 2017 at 15:30 | Posted in Economics | 3 Comments

Dear President Trump,

Plenty of people will try to convince you that globalization and free trade could benefit everyone, if only the gains were more fairly shared …

trade-copyThis belief is shared by almost all politicians in both parties, and it’s an article of faith for the economics profession.

You are right to reject it …

It’s a fallacy based on a fantasy, and it has been ever since David Ricardo dreamed up the idea of “Comparative Advantage and the Gains from Trade” two centuries ago. The best way to prove that (apart from looking at the bitter experience of the millions of once-were-factory-workers who voted for you) is to apply real-world scepticism to the original argument in favour of free trade …

Ricardo’s model assumed that you could produce wine or cloth with only labour, but of course you can’t. You need machines as well, and machinery is specific to each industry. The essential machinery for making wine can’t be used to make anything else, if its use becomes unprofitable. It is either scrapped, sold at a large loss, or shipped overseas. Ditto a spinning jenny, or a steel mill: if making steel becomes unprofitable, the capital involved in its production is effectively destroyed …

Ricardo’s little shell and pea trick is therefore like most conventional economic theory: it’s neat, plausible, and wrong. It’s the product of armchair thinking by people who never put foot in the factories that their economic theories turned into rust buckets.

Steve Keen

As always with Keen — thought-provoking and interesting. But I think he misses the most powerful argument against the Ricardian paradigm — what counts to day is not comparative advantage, but absolute advantage.

In 1817 David Ricardo presented — in Principles — a theory that was meant to explain why countries trade and, based on the concept of opportunity cost, how the pattern of export and import is ruled by countries exporting goods in which they have comparative advantage and importing goods in which they have a comparative disadvantage.

Heckscher-Ohlin-HO-Modern-Theory-of-International-TradeRicardo’s theory of comparative advantage, however, didn’t explain why the comparative advantage was the way it was. In the beginning of the 20th century, two Swedish economists — Eli Heckscher and Bertil Ohlin — presented a theory/model/theorem according to which the comparative advantages arose from differences in factor endowments between countries. Countries have a comparative advantages in producing goods that use up production factors that are most abundant in the different countries. Countries would mostly export goods that used the abundant factors of production and import goods that mostly used factors of productions that were scarce.

The Heckscher-Ohlin theorem –as do the elaborations on in it by e.g. Vanek, Stolper and Samuelson — builds on a series of restrictive and unrealistic assumptions. The most critically important — beside the standard market clearing equilibrium assumptions — are

(1) Countries use identical production technologies.

(2) Production takes place with a constant returns to scale technology.

(3) Within countries the factor substitutability is more or less infinite.

(4) Factor-prices are equalised (the Stolper-Samuelson extension of the theorem).

These assumptions are, as almost all empirical testing of the theorem has shown, totally unrealistic. That is, they are empirically false.

That said, one could indeed wonder why on earth anyone should be interested in applying this theorem to real-world situations. As so many other mainstream mathematical models taught to economics students today, this theorem has very little to do  with the real world.

What has changed since Ricardo’s days is that the assumption of internationally immobile factors of production has been made totally untenable in our globalised world. When our modern corporations maximize their profits they do it by moving capital and technologies to where it is cheapest to produce.

So we’re actually in a situation today where absolute — not comparative — advantages rules the roost when it comes to free trade.

And in that world, what is good for corporations are not necessarily good for nations.

Poverty — the Dumb and Dumber version

25 January, 2017 at 10:20 | Posted in Economics | Comments Off on Poverty — the Dumb and Dumber version

A few years ago, two economics professors, Quamrul Ashraf and Oded Galor, published a paper, “The ‘Out of Africa’ Hypothesis, Human Genetic Diversity, and Comparative Economic Development,” that drew inferences about poverty and genetics based on a statistical pattern …

dumb_aWhen the paper by Ashraf and Galor came out, I criticized it from a statistical perspective, questioning what I considered its overreach in making counterfactual causal claims … I argued (and continue to believe) that the problems in that paper reflect a more general issue in social science: There is an incentive to make strong and dramatic claims to get published in a top journal …

I continue to think that Ashraf and Galor’s paper is essentially an analysis of three data points (sub-Saharan Africa, remote Andean countries and Eurasia). It offered little more than the already-known stylized fact that sub-Saharan African countries are very poor, Amerindian countries are somewhat poor, and countries with Eurasians and their descendants tend to have middle or high incomes.

Andrew Gelman

How to do econometrics properly

25 January, 2017 at 10:16 | Posted in Statistics & Econometrics | Comments Off on How to do econometrics properly

top-10-retail-news-thumb-610xauto-79997-600x240-1

  1. Always, but always, plot your data.
  2. Remember that data quality is at least as important as data quantity.
  3. Always ask yourself, “Do these results make economic/common sense”?
  4. Check whether your “statistically significant” results are also “numerically/economically significant”.
  5. Be sure that you know exactly what assumptions are used/needed to obtain the results relating to the properties of any estimator or test that you use.
  6. Just because someone else has used a particular approach to analyse a problem that looks like yours, that doesn’t mean they were right!
  7. “Test, test, test”! (David Hendry). But don’t forget that “pre-testing” raises some important issues of its own.
  8. Don’t assume that the computer code that someone gives to you is relevant for your application, or that it even produces correct results.
  9. Keep in mind that published results will represent only a fraction of the results that the author obtained, but is not publishing.
  10. Don’t forget that “peer-reviewed” does NOT mean “correct results”, or even “best practices were followed”.

Dave Giles

London Calling

24 January, 2017 at 20:35 | Posted in Varia | Comments Off on London Calling

 

Old loves die hard

Quand on n’a que l’amour

24 January, 2017 at 19:34 | Posted in Varia | 1 Comment


Une grande chanson d’espoir qui touche mon cœur toujours.

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