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A realist approach to econometrics

from Asad Zaman

The talk linked below explains why the positivist/nominalist methodology used in Econometrics leads to mostly nonesense regressions. It also explains how a realist alternative can be developed.

“The Philosophy and Techniques for Quantitative Research” – Keynote Address by Dr. Asad Zaman, VC PIDE at Workshop on 19-20 April, 2018 Dept of Economics, Fatima Jinnah Women’s University, Rawalpindi, Pakistan.

My message will come as a surprise to students gathered here to learn advanced econometric techniques. Let me begin by stating it baldly: “Econometrics is nothing more than Fraud by Numbers”.

As Joan Robinson famously said, “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” A similar statement holds for econometrics. We should learn it not in order to acquire techniques which will teach us how to use data sets to make inferences about reality. Rather, we should learn it to avoid being deceived by econometricians. The techniques described by Perkins in “Confessions of an Economic Hit-Man” are in common use around the world. Fancy econometrics is used to persuade people to adopt policies which harm the public, while fattening corporate coffers.  read more

  1. Frank Salter
    May 7, 2018 at 12:49 pm

    As a description of economic theorising, the article is relevant.

    As a description of science, which it also claims to be, it is a total travesty. A major omission is that much of scientific understanding arises from first principle analysis of which no mention is made in the article — google indexes more than two million papers in which the term “first principle” occurs.

    Scientific laws are (Wikipedia) “merely distillations of the results of repeated observation” and “remain useful, but only under the conditions where they apply”. There is no unreasoning acceptance of absolute truth.

    Scientific theories are not self-exclusive. Pluralism is normal. Using statistics to provide a measure of experimental error is common. Compare the 6𝜎 level for acceptance found in physics with what happens in econometrics!

    The terse “Correlation does not imply causation” might be seen as an abstract for the article.

  2. Helen Sakho
    May 9, 2018 at 9:35 pm

    In response to recent posts by all colleagues, including the valuable interview by Swedish colleagues, I would only add, taking Sweden itself as a good example.

    Sweden, historically perceived as a “natural” geography, imported labour (needless to specify which parts of the world they came from) when it suffered negative population growth due to the changing nature of its own internal labour markets, and did offer excellent social benefits to those who accepted to be its citizens. The utter Cultural Confusion that it has suffered and will continue to suffer for generations to come was and remains a predictable dilemma. All our good colleagues need to do is to look at the composition of Sweden’s current divisions of labour in both first-generation immigrants, while looking forward to the growth of the second generation, born and bred in Sweden).
    This has ensured that its own Cultural Confusions have now been passed on its immigrants who will ultimately pay the higher price.
    As a general rule, places like Sweden (historically in conflict with its own history let alone its neighbours next door) choose to opt for the “easy way out”, creating diluted identities which are re-constructed at the will of the State, which is the everywhere the ultimate guard of boarders. The rise of Fascism (call it what you like: Neo-liberalism, Globalisation, Neo-Keynesianism, Ultra-Imperialisms, New Century Racism, etc.) is the result, and it backfires not just on societies such as Sweden but on the whole world. Do Not forget to add to this list, the rise of “New Terrorism”, plus the shrinking resources of States that pretend to be dealing with this “new” phenomenon pleading shrinking resources, plus the rise of poverty and unemployment everywhere and the desperation of the new entrants to any labour market, etc. and let us draw a new graph and re-invent a new formula that can encompass all this. Histories and Geographies that are authentic will Always leave an erasable mark on both, regardless of one’s academic or non-academic beliefs, inclinations, variations, divergences, no matter how many times they are gassed, flattened, invaded, poisoned, impoverished, starved or waiting for their “pot luck” to survive. Hitler, was reportedly a gay vegetarian, who did kill himself, having without a doubt killed millions of Jews, Christians and all others who strived to protect them.

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