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Sound and fury: McCloskey and significance testing in economics

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Author Info
Kevin Hoover
Mark Siegler

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Abstract

For more than 20 years, Deidre McCloskey has campaigned to convince the economics profession that it is hopelessly confused about statistical significance. She argues that many practices associated with significance testing are bad science and that most economists routinely employ these bad practices: 'Though to a child they look like science, with all that really hard math, no science is being done in these and 96 percent of the best empirical economics …' (McCloskey 1999). McCloskey's charges are analyzed and rejected. That statistical significance is not economic significance is a jejune and uncontroversial claim, and there is no convincing evidence that economists systematically mistake the two. Other elements of McCloskey's analysis of statistical significance are shown to be ill-founded, and her criticisms of practices of economists are found to be based in inaccurate readings and tendentious interpretations of those economists' work. Properly used, significance tests are a valuable tool for assessing signal strength, for assisting in model specification, and for determining causal structure.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Journal of Economic Methodology.

Volume (Year): 15 (2008)
Issue (Month): 1 ()
Pages: 1-37
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Handle: RePEc:taf:jecmet:v:15:y:2008:i:1:p:1-37

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Related research
Keywords: Deidre McCloskey; Stephen Ziliak; statistical significance; economic significance; significance tests; R.A. Fisher; Neyman-Pearson testing; specification search; C10; C12; B41;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Ziliak, Stephen T. & McCloskey, Deirdre N., 2004. "Size matters: the standard error of regressions in the American Economic Review," The Journal of Socio-Economics, Elsevier, vol. 33(5), pages 527-546, November. [Downloadable!] (restricted)
    Other versions:
  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 201-05, May. [Downloadable!] (restricted)
  4. Elliott, Graham & Granger, Clive W.J., 2004. "Evaluating significance: comments on "size matters"," The Journal of Socio-Economics, Elsevier, vol. 33(5), pages 547-550, November. [Downloadable!] (restricted)
  5. Krolzig, Hans-Martin & Hendry, David F., 2001. "Computer automation of general-to-specific model selection procedures," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 831-866, June. [Downloadable!] (restricted)
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  6. Gigerenzer, Gerd, 2004. "Mindless statistics," The Journal of Socio-Economics, Elsevier, vol. 33(5), pages 587-606, November. [Downloadable!] (restricted)
  7. Deirdre N. McCloskey, 1999. "Other Things Equal: Cassandra's Open Letter to Her Economist Colleagues," Eastern Economic Journal, Eastern Economic Association, vol. 25(3), pages 357-363, Summer. [Downloadable!]
  8. Cooley, Thomas F & LeRoy, Stephen F, 1981. "Identification and Estimation of Money Demand," American Economic Review, American Economic Association, vol. 71(5), pages 825-44, December. [Downloadable!] (restricted)
  9. Kevin D. Hoover & Stephen J. Perez, 1999. "Data mining reconsidered: encompassing and the general-to-specific approach to specification search," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 167-191.
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  10. Lovell, Michael C, 1983. "Data Mining," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 1-12, February. [Downloadable!] (restricted)
  11. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June. [Downloadable!] (restricted)
  12. Wooldridge, Jeffrey M., 2004. "Statistical significance is okay, too: comment on "Size Matters"," The Journal of Socio-Economics, Elsevier, vol. 33(5), pages 577-579, November. [Downloadable!] (restricted)
  13. Wible, James R, 1994. "Charles Sanders Peirce's Economy of Research," Journal of Economic Methodology, Taylor and Francis Journals, vol. 1(1), pages 135-60, June.
  14. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June. [Downloadable!] (restricted)
  15. Kevin D. Hoover, Stephen J. Perez, 2000. "Three attitudes towards data mining," Journal of Economic Methodology, Taylor and Francis Journals, vol. 7(2), pages 195-210, June. [Downloadable!] (restricted)
  16. Bernheim, B Douglas & Wantz, Adam, 1995. "A Tax-Based Test of the Dividend Signaling Hypothesis," American Economic Review, American Economic Association, vol. 85(3), pages 532-51, June. [Downloadable!] (restricted)
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  17. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November. [Downloadable!] (restricted)
  18. Ziliak, Stephen T. & McCloskey, Deirdre N., 2004. "Significance redux," The Journal of Socio-Economics, Elsevier, vol. 33(5), pages 665-675, November. [Downloadable!] (restricted)
  19. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1994. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Kevin D. Hoover & Stephen J. Perez, 2004. "Truth and Robustness in Cross-country Growth Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 765-798, December. [Downloadable!] (restricted)
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  21. Spanos, Aris, 1995. "On theory testing in econometrics : Modeling with nonexperimental data," Journal of Econometrics, Elsevier, vol. 67(1), pages 189-226, May. [Downloadable!] (restricted)
  22. Hoover, Kevin D, 1994. "Econometrics as Observation: The Lucas Critique and the Nature of Econometric Inference," Journal of Economic Methodology, Taylor and Francis Journals, vol. 1(1), pages 65-80, June.
  23. Kahn, James A. & Landsburg, Steven E. & Stockman, Alan C., 1996. "The Positive Economics of Methodology," Journal of Economic Theory, Elsevier, vol. 68(1), pages 64-76, January. [Downloadable!] (restricted)
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  24. Keuzenkamp, Hugo A. & Magnus, Jan R., 1995. "On tests and significance in econometrics," Journal of Econometrics, Elsevier, vol. 67(1), pages 5-24, May. [Downloadable!] (restricted)
  25. McAleer, Michael & Pagan, Adrian, 1985. "What Will Take the Con Out of Econometrics?," CEPR Discussion Papers 39, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  26. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September. [Downloadable!] (restricted)
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  27. Blank, Rebecca M, 1991. "The Effects of Double-Blind versus Single-Blind Reviewing: Experimental Evidence from The American Economic Review," American Economic Review, American Economic Association, vol. 81(5), pages 1041-67, December. [Downloadable!] (restricted)
  28. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September. [Downloadable!] (restricted)
  29. Summers, Lawrence H, 1991. " The Scientific Illusion in Empirical Macroeconomics," Scandinavian Journal of Economics, Blackwell Publishing, vol. 93(2), pages 129-48.
  30. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
  31. Deirdre N. McCloskey, 1997. "Other Things Equal: Aunt Deirdre's Letter to a Graduate Student," Eastern Economic Journal, Eastern Economic Association, vol. 23(2), pages 241-244, Spring. [Downloadable!]
  32. Kevin Hoover, 2004. "Lost Causes," Journal of the History of Economic Thought, Taylor and Francis Journals, vol. 26(2), pages 149-164, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tom Engsted, 2009. "Statistical vs. Economic Significance in Economics and Econometrics: Further comments on McCloskey & Ziliak," CREATES Research Papers 2009-17, School of Economics and Management, University of Aarhus. [Downloadable!]
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