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A Scientific View of Economic Data Analysis

Author

Listed:
  • Cornelis A. Los

    (Netherlands Chamber of Commerce in the US)

Abstract

Identification of systems from empirical data is a fundamental problem of economic science. In 1982 Leontief testified that Haavelmo's statistical approach to this problem has not advanced an objective understanding of economic systems. The question is: why? The standard presumptions of econometrics, e.g. that the system (" model") is known before the data are analyzed, are unscientific. They can be shown to imply that scientific evidence will be ignored. The results depend on these prejudices and not on the data, as is illustrated by a detailed example for Wall Street's investment advisory practice. However, an objective identification method, based on the recently discovered Kalman Theorem, exists and leads to surprising results.

Suggested Citation

  • Cornelis A. Los, 1991. "A Scientific View of Economic Data Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 61-71, Jan-Mar.
    • Handle: RePEc:eej:eeconj:v:17:y:1991:i:1:p:61-71
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume17/V17N1P61_71.pdf
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    References listed on IDEAS

    as
    1. Cornelis A. Los, 1986. "Quality control of empirical econometrics: a status report," Research Paper 8606, Federal Reserve Bank of New York.
    2. 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.
    3. Worswick, G D N, 1972. "Is Progress in Economic Science Possible?," Economic Journal, Royal Economic Society, vol. 82(325), pages 73-86, March.
    4. Christ, Carl F, 1983. "The Founding of the Econometric Society and Econometrica," Econometrica, Econometric Society, vol. 51(1), pages 3-6, January.
    5. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
    6. Mayer, Thomas, 1980. "Economics as a Hard Science: Realistic Goal or Wishful Thinking?," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 165-178, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Cornelis A. Los, 2005. "Were Cobb and Douglas Prejudiced? A Critical Re-analysis of their 1928 Production Model Identification," Econometrics 0502013, University Library of Munich, Germany.
    2. Los, Cornelis A., 1999. "Galton's Error and the under-representation of systematic risk," Journal of Banking & Finance, Elsevier, vol. 23(12), pages 1793-1829, December.
    3. Cornelis A. Los, 2000. "Visualization of Chaos for Finance Majors," School of Economics and Public Policy Working Papers 2000-07, University of Adelaide, School of Economics and Public Policy.
    4. Cornelis A. Los, 2004. "Measuring Financial Cash Flow and Term Structure Dynamics," Finance 0409046, University Library of Munich, Germany.
    5. Los, Cornelis A. & Tungsong, Satjaporn, 2008. "Investment Model Uncertainty and Fair Pricing," MPRA Paper 8859, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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