The thing that gets me is that ALL of these models are models of "markets" without so much as boo about whether the metaphor of a market is adequate to the phenomenon being studied. The usage is so engrained and customary that to question it is to invoke the "huh? what are you smokin'?" response. I'm sure 12th century theologians would have been delighted to have "theometrics" to test their hypotheses with.
Of course, if you assume that what you're analyzing is markets, these models are going to provide hefty confirmation bias of the GiGo variety 'cause the express "equilibrium." Supply equals demand. Garbage in equals garbage out. I wouldn't object to people using these "tools" and metaphors if they didn't become mesmerized and stupefied by them. But quite obviously they do. The dominant conversation of economics is cognitive dissonance. What elephant in the room? What skeleton in the closet? I don't see any elephants or skeletons in the data! On Mon, Oct 10, 2011 at 12:34 PM, Julio Huato <[email protected]> wrote: > Jim Devine wrote: > > > But the valid approach to econometrics is hypothesis testing -- not > > this "let's see what fits" approach. > > This is the kind of reaction I'm trying to warn young people against > -- a reaction based on a superficial understanding of a technique. > > Computationally, VAR is a procedure to estimate the parameters of a > time-series model. It's up to you to decide which parameters you > estimate. So, of course you can do hypothesis testing with VAR. It > depends on which parameters you decide to estimate. If you have > enough degrees of freedom (data), then you can estimate the model > "coefficients" and higher moments as well -- as high as you wish. > Typically, economists estimate var-covar matrices as a matter of > routine (which gives you the weights to test your coefficients). > Hypothesis tests for each coefficient (and for the whole model) are > default procedure. > > If you wish, call it "empiricism" (if you don't care about conceptual > precision) -- but not "crude." But here's the way for people to > decide on their own whether it is crude or not -- spend some time > getting your head around the principles, then take a bunch of data and > use it yourself! How can it harm you? > > By the way, I disagree with Krugman that these techniques let the data > speak (although he may have put things that way to abbreviate). > Obviously, there are always assumptions built in. But they are rather > mild -- and the point is precisely relaxing them to the extent the > data allow. The remarkable thing, IMO, is how much true information > you can get from data thus digested. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Sandwichman
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