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Is the "con" gone from Econometrics?
(spillover from the thread on the Easterly piece)
Ed Leamer wrote a famous piece in the early 80s decrying the ad hoc BS nature of most econometric research entitled "Lets take the Con out of Econometrics"
Focusing on the poorly constructed and contradictory findings in the 70s over the relationship between crime and capital punishment, he substantiated the quip that "doing econometrics is like trying to learn the laws of electricity by playing the radio"
https://management.ucsd.edu/faculty/directory/valkanov/classes/mfe/docs/Leamer_1983.pdf
Last year, Angrist and Pishke, a couple of econometricians at MIT wrote a paper discussing how better research design was "taking the con from econometrics". Their focus was primarily on microeconomic studies and the paper expressed frustration with the current failed state of quantitative macroeconomics but provided some rays of hope
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1639809
Ed Leamer wrote in response that randomization was not sufficient and their hopes of a better empirical and quantitative macroeconomics was illusionary and at best what this quantitative research was doing was simply satisfying a basic human need to "seek patterns and tell stories"
http://www.anderson.ucla.edu/faculty/edward.leamer/selected_research/Tantalus by Leamer.pdf
and concludes
(spillover from the thread on the Easterly piece)
Ed Leamer wrote a famous piece in the early 80s decrying the ad hoc BS nature of most econometric research entitled "Lets take the Con out of Econometrics"
Focusing on the poorly constructed and contradictory findings in the 70s over the relationship between crime and capital punishment, he substantiated the quip that "doing econometrics is like trying to learn the laws of electricity by playing the radio"
https://management.ucsd.edu/faculty/directory/valkanov/classes/mfe/docs/Leamer_1983.pdf
Last year, Angrist and Pishke, a couple of econometricians at MIT wrote a paper discussing how better research design was "taking the con from econometrics". Their focus was primarily on microeconomic studies and the paper expressed frustration with the current failed state of quantitative macroeconomics but provided some rays of hope
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1639809
Ed Leamer wrote in response that randomization was not sufficient and their hopes of a better empirical and quantitative macroeconomics was illusionary and at best what this quantitative research was doing was simply satisfying a basic human need to "seek patterns and tell stories"
http://www.anderson.ucla.edu/faculty/edward.leamer/selected_research/Tantalus by Leamer.pdf
We economists trudge relentlessly toward Asymptopia, where data are unlimited
and estimates are consistent, where the laws of large numbers apply perfectly and
where the full intricacies of the economy are completely revealed. But it’s a frustrating
journey, since, no matter how far we travel, Asymptopia remains infifi nitely far
away. Worst of all, when we feel pumped up with our progress, a tectonic shift can
occur, like the Panic of 2008, making it seem as though our long journey has left us
disappointingly close to the State of Complete Ignorance whence we began.
The pointlessness of much of our daily activity makes us receptive when the
Priests of our tribe ring the bells and announce a shortened path to Asymptopia.
(Remember the Cowles Foundation offering asymptotic properties of simultaneous
equations estimates and structural parameters?) We may listen, but we don’t hear,
when the Priests warn that the new direction is only for those with Faith, those
with complete belief in the Assumptions of the Path. It often takes years down the
Path, but sooner or later, someone articulates the concerns that gnaw away in each of us and asks if the Assumptions are valid. (T. C. Liu (1960) and Christopher Sims
(1980) were the ones who proclaimed that the Cowles Emperor had no clothes.)
Small seeds of doubt in each of us inevitably turn to despair and we abandon that
direction and seek another.
and concludes
Ignorance is a formidable foe, and to have hope of even modest victories, we
economists need to use every resource and every weapon we can muster, including
thought experiments (theory), and the analysis of data from nonexperiments,
accidental experiments, and designed experiments. We should be celebrating the
small genuine victories of the economists who use their tools most effectively, and
we should dial back our adoration of those who can carry the biggest and brightest
and least-understood weapons. We would benefifi t from some serious humility, and
from burning our “Mission Accomplished” banners. It’s never going to happen.
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