The dangers of using unproved assumptions

12 Nov, 2022 at 09:27 | Posted in Statistics & Econometrics | 4 Comments

2014+22keynes%20illo2The unpopularity of the principle of organic unities shows very clearly how great is the danger of the assumption of unproved additive formulas. The fallacy, of which ignorance of organic unity is a particular instance, may perhaps be mathematically represented thus: suppose f(x) is the goodness of x and f(y) is the goodness of y. It is then assumed that the goodness of x and y together is f(x) + f(y) when it is clearly f(x + y) and only in special cases will it be true that f(x + y) = f(x) + f(y). It is plain that it is never legitimate to assume this property in the case of any given function without proof.

J. M. Keynes “Ethics in Relation to Conduct” (1903)

Since econometrics doesn’t content itself with only making optimal predictions, but also aspires to explain things in terms of causes and effects, econometricians need loads of assumptions — the most important of these are additivity and linearity. Important, simply because if they are not true, your model is invalid and descriptively incorrect. It’s like calling your house a bicycle. No matter how you try, it won’t move you an inch. When the model is wrong — well, then it’s wrong.


  1. Keynes’ “Ethics in Relation to Conduct” is merely trite philosophical musing with no relevance to econometrics.
    Keynes’ actual ethics are revealed by his abominable personal life. See:
    Dobbs: Keynes at Harvard 2e 1969: Chapter 9: The social consequences of moral depravity

    Click to access Keynes_At_Harvard.pdf

  2. Not just not additive. They are not transitive. See demonstration in my PhD ch3 or 4.

    • It’s heartening to see PHD students asking these types of questions and pursuing this level of critical enquiry.

      • Philosophy PhD 1990

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