IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v66y2020icp315-324.html
   My bibliography  Save this article

A more scientific approach to applied economics: Reconstructing statistical, analytical significance, and correlation analysis

Author

Listed:
  • Altman, Morris

Abstract

There is a deep and well-regarded tradition in applied economic research and in other social sciences to assign causality to correlation analysis and statistical significance. I critique the application of correlation analysis, unsubstantiated with empirical backing of prior assumptions, as the core analytical measure for causation. Moreover, this paper critiques the past and current focus on statistical significance as the core indicator of substantive or analytical significance, especially when paired with correlation analysis. I attempt to explain the persistence of the misplaced use of these statistical techniques in the applied literature. I also propose a positive analytical frame wherein correlation analysis and tests of statistical significance, as part of a large analytical toolbox, can make a positive contribution to the analytical literature.

Suggested Citation

  • Altman, Morris, 2020. "A more scientific approach to applied economics: Reconstructing statistical, analytical significance, and correlation analysis," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 315-324.
    • Handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:315-324
    DOI: 10.1016/j.eap.2020.05.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592619304813
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2020.05.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michelle Baddeley, 2013. "Herding, social influence and expert opinion," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(1), pages 35-44.
    2. Arthur T. Denzau & Douglass C. North, 1994. "Shared Mental Models: Ideologies and Institutions," Kyklos, Wiley Blackwell, vol. 47(1), pages 3-31, February.
    3. McCloskey, Donald N, 1985. "The Loss Function Has Been Mislaid: The Rhetoric of Significance Tests," American Economic Review, American Economic Association, vol. 75(2), pages 201-205, May.
    4. Nathan Berg & Gerd Gigerenzer, 2010. "As-if behavioral economics: neoclassical economics in disguise?," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 18(1), pages 133-166.
    5. Ziliak, Stephen T. & McCloskey, Deirdre N., 2004. "Size matters: the standard error of regressions in the American Economic Review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 527-546, November.
    6. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    7. Berg, Nathan, 2004. "No-decision classification: an alternative to testing for statistical significance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 631-650, November.
    8. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    9. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
    10. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 715-753.
    11. Ziliak, Stephen T., 2011. "W.S. Gosset and Some Neglected Concepts in Experimental Statistics: Guinnessometrics II," Journal of Wine Economics, Cambridge University Press, vol. 6(2), pages 252-277, October.
    12. Morris Altman, 1999. "The Methodology of Economics and the Survival Principle Revisited and Revised: Some Welfare and Public Policy Implications of Modeling the Economic Agent," Review of Social Economy, Taylor & Francis Journals, vol. 57(4), pages 427-449.
    13. Altman, Morris, 2004. "Statistical significance, path dependency, and the culture of journal publication," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 651-663, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goczek Łukasz & Witkowski Bartosz & Witkowska Ewa, 2022. "Does an increase in education quality cause developing countries to catch up?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 58(4), pages 393-408, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krieger-Boden, Christiane, 2013. "New ethics for economics?," Kiel Policy Brief 60, Kiel Institute for the World Economy (IfW Kiel).
    2. Morris Altman, 2019. "Implications of smart decision-making and heuristics for production theory and material welfare," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 18(2), pages 167-179, December.
    3. Rachel G. Childers, 2011. "Being One'S Own Boss: How Does Risk Fit In?," The American Economist, Sage Publications, vol. 56(1), pages 48-58, May.
    4. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    5. Stephen T. Ziliak & Deirdre N. McCloskey, 2013. "We Agree That Statistical Significance Proves Essentially Nothing: A Rejoinder to Thomas Mayer," Econ Journal Watch, Econ Journal Watch, vol. 10(1), pages 97-107, January.
    6. Black, Bernard & Hollingsworth, Alex & Nunes, Letícia & Simon, Kosali, 2022. "Simulated power analyses for observational studies: An application to the Affordable Care Act Medicaid expansion," Journal of Public Economics, Elsevier, vol. 213(C).
    7. Bogliacino, Francesco & Codagnone, Cristiano, 2021. "Microfoundations, behaviour, and evolution: Evidence from experiments," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 372-385.
    8. Altman, Morris, 2014. "Insights from behavioral economics on how labor markets work," Working Paper Series 3466, Victoria University of Wellington, School of Economics and Finance.
    9. Kevin Hoover & Mark Siegler, 2008. "Sound and fury: McCloskey and significance testing in economics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 15(1), pages 1-37.
    10. Drakopoulos, Stavros A., 2022. "The Conceptual Resilience of the Atomistic Individual in Mainstream Economic Rationality," MPRA Paper 112944, University Library of Munich, Germany.
    11. Jens Rommel & Meike Weltin, 2021. "Is There a Cult of Statistical Significance in Agricultural Economics?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 1176-1191, September.
    12. Altman, Morris, 2004. "Statistical significance, path dependency, and the culture of journal publication," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 651-663, November.
    13. Nektarios A. Michail & Constantinos I. Massouras, 2014. "Back to Basics: Is Statistical Significance all that Matters?," Working Papers 2014-3, Central Bank of Cyprus.
    14. Morris Altman, 2021. "Methodological challenges in Behavioural Economics: Towards a more holistic and empirically rooted economic science," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 5(S3), pages 19-33, October.
    15. Philipp Doerrenberg & Jan Schmitz, 2017. "Tax compliance and information provision. A field experiment with small firms," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(1), pages 47-54, February.
    16. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, August.
    17. Kim, Jae H. & Ji, Philip Inyeob, 2015. "Significance testing in empirical finance: A critical review and assessment," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 1-14.
    18. Morris Altman, 2018. "Extending the theoretical lenses of behavioral economics through the sociological prisms of Gary Becker," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(1), pages 45-51, March.
    19. Lundberg, Shelly, 2022. "Gender Economics: Dead-Ends and New Opportunities," IZA Discussion Papers 15217, Institute of Labor Economics (IZA).
    20. Richard Arena & Agnès Festré & Nathalie Lazaric, 2012. "Introduction," Post-Print halshs-01053657, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:315-324. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.