Home > Uncategorized > Malinvaud on how USA economists increasingly dismissed measurement

Malinvaud on how USA economists increasingly dismissed measurement

One of the problems of the economics curriculum is that very little attention is paid to measurement. And indeed, academic economists generally know little about this as most measurement is carried out by specialized statistical institutes. What about the history of this regrettable situation? The French economist Malinvaud (and long time head of the French statistical institute INSEE) has a nice metric on how USA economists increasingly dismissed empirical economics (let alone actual measurement) and turned to a-empirical ´high theory´ littered will ill-defined variables instead:

Econometric Methodology
at the Cowles Commission: Rise and Maturity

Edmond Malinvaud

Abstracted from the Cowles Fiftieth Anniversary Volume

Considering the contribution of the Cowles research institute to the development of econometrics, one has little choice but to focus on one major achievement, the building of the simultaneous-equation methodology. It is not necessary to demonstrate the indisputable fact that this methodology was conceived and elaborated at the Cowles Commission in the forties. Neither does one need to insist on the long-standing significance of this achievement nor on its central place in any education or reflection concerning statistical inference about economic phenomena. More interesting is the question of how research at Cowles during the first 15 years of its existence led to this result and how further econometric research here during the last 30 years relates to the simultaneous-equation achievement.

For 20 years, the motto of the Cowles Commission, printed on its monographs and reports, was Lord Kelvin’s sentence, “Science is measurement.” This might suggest that the main emphasis was then given to econometrics and that, from the beginning, research was devoted to the subject that matured in the forties.

The facts are not so simple. In the first place, during the first years a good deal of attention was devoted to direct measurement, as distinct from inference based on available statistical measures. Cowles Commission Monograph No. 3, written by A. Cowles and associates, first published in 1938, was the outcome of the first research project selected in 1932 and was entirely devoted to working out monthly indexes of stock prices and annual indexes of stock yields. During the six Cowles Commission summer conferences held from 1935 to 1940, which then played a great role in the Commission’s activities, the progress of official statistics was occasionally discussed, in particular in papers that dealt with such subjects as population censuses.

During those first years, the research program at Cowles may be characterized as a combination of direct measurement, econometrics, and nonformalized study of economic evolution. Particularly typical of the last component was Cowles Commission Monograph No. 4, Silver Money, written by D.H. Leavens and published in 1939.

What about pure economic theory, which later took the predominant place in the Cowles Foundation activities? But it was not the direct subject of substantial research before September 1939 when O. Lange and I. Mosak simultaneously joined the staff Their Cowles Commission Monographs, respectively Nos. 8 and 7, both published in 1944, Price Flexibility and Employment, and General-Equilibrium Theory in International Trade, were the first ones to deal with formalized economic theory …

The next step occurred in 1942–1943 when L. Hurwicz, I. Marschak, and T. Haavelmo successively joined the Commission and when the series of the Cowles Commission Papers was started, to be later called the Cowles Foundation Paper Series. Glancing through the titles of the papers contained in this series, one may note that a sharp turn took place in 1950; indeed, economic theory was the subject of about one-third of the papers up to 1950, but of roughly two-thirds in the following years. By 1952 the role of theory had become so important that the motto “Science is measurement” no longer seemed to be appropriate. When C. Hildreth proposed to change it to “Theory and measurement,” the suggestion was immediately accepted. I do not know exactly when and why the motto was dropped; but I note that it still appears on the report for the two years 1952–54 but no longer on the 1954–56 Report of Research Activity.

Looking at the Cowles Foundation Papers published since then, I estimate that roughly one-fourth of them were devoted to such applications, the proportion being definitely higher during the late fifties. From the point of view of this paper, the important observation is, however, that research in econometric methodology did not regain, for three decades, the predominance it had had in the forties: only some 35 Cowles Foundation Papers out of more than 460 published between 1956 and 1982 clearly concerned this subject.

  1. Lyonwiss
    November 24, 2013 at 12:42 pm

    From a scientific point of view, data or measurements for economics are just as important as those for physics. However, the data in economics are intrinsically different from those in physics.

    Much of the physics data, obtained through observations and experiments, are spatially and temporally independent. The same astronomical observation can be made simultaneously from different places on earth. Certain important laws or regularities can be replicated and verified at different times and in different places.

    Economics data virtually never have the same quality or certainty from replication and verification which are possible in physics. Economists are either ignorant of this difference or they pretend that it is unimportant, judging by the lack of attention paid to the data they use in applied econometric papers.

    If economists are not concerned about the quality of the data they use, then there is no incentive to improve data quality and over time, the data become inaccurate or simply noise. This carelessness undermines the empirical validity of economics, as an essential component of a science.

    For example, there appears to have been no howls of protest by economists when recent US jobless statistics were reported to have been fabricated:


    The seriousness of this, if economics were to be a science, cannot be understated, because there is no second chance to collect the same data once the opportunity is passed, unlike the situation in physics. The survey data from census interviews represent a snapshot of US joblessness at a particular point in time.

    The government which is responsible for collecting the data (through Department of Labor) is also assessed on its performance by the same data, creating a conflict of interest and an incentive to “doctor” the numbers. There needs to be some redundancy and independent verification of economic measurements.

  2. November 24, 2013 at 3:38 pm

    “… dismissed measurement …” serves this dominant theme:
    The Public Be Suckered

    • February 6, 2014 at 10:24 pm

      I call the substantial omissions of decisive data “intellectual savagery”.

  3. February 6, 2014 at 7:41 pm

    Excellent remark about the measurement problem in economics. I used to think that, contrarily to physics, economics measurements could aim for accuracy but not precision. But even that may not be feasible in the light of complexity theory. If markets are irremediably imperfect while their attracting sets are non-hyperbolic, i. e., extremely sensitive to noise, then market outcomes are bound to be spurious. If so, we must pay heed to Poincare’ advice to focus on qualitative analyses!!

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