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A Critical Analysis of Dimensions and Curve Fitting Practice in Economics

Author

Listed:
  • Kozo Mayumi

    (Faculty of Integrated Arts and Sciences, The University of Tokushima)

  • Mario Giampietro

    (Institut de Ciencia i Tecnologia Ambientals, Universitat Autònoma de Barcelona)

  • Jesus Ramos-Martin

    (Departament d'Economia i d'Història Econòmica, Universitat Autònoma de Barcelona)

Abstract

When dealing with sustainability we are concerned with the biophysical as well as the monetary aspects of economic and ecological interactions. This multidimensional approach requires that special attention is given to dimensional issues in relation to curve fitting practice in economics. Unfortunately, many empirical and theoretical studies in economics, as well as in ecological economics, apply dimensional numbers in exponential or logarithmic functions. We show that it is an analytical error to put a dimensional unit x into exponential functions ( a x ) and logarithmic functions ( x a log ). Secondly, we investigate the conditions of data sets under which a particular logarithmic specification is superior to the usual regression specification. This analysis shows that logarithmic specification superiority in terms of least square norm is heavily dependent on the available data set. The last section deals with economists’ “curve fitting fetishism”. We propose that a distinction be made between curve fitting over past observations and the development of a theoretical or empirical law capable of maintaining its fitting power for any future observations. Finally we conclude this paper with several epistemological issues in relation to dimensions and curve fitting practice in economics.

Suggested Citation

  • Kozo Mayumi & Mario Giampietro & Jesus Ramos-Martin, 2010. "A Critical Analysis of Dimensions and Curve Fitting Practice in Economics," UHE Working papers 2010_01, Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica.
  • Handle: RePEc:aub:uhewps:2010_01
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    References listed on IDEAS

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    1. Mayumi, Kozo & Giampietro, Mario & Gowdy, John M., 1998. "Georgescu-Roegen/Daly versus Solow/Stiglitz Revisited," Ecological Economics, Elsevier, vol. 27(2), pages 115-117, November.
    2. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-179, May.
    3. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    4. Morse, Stephen, 2006. "Making development simple. The genetic deterministic hypothesis for economic development," Ecological Economics, Elsevier, vol. 56(1), pages 79-88, January.
    5. H. S. Houthakker, 1955. "The Pareto Distribution and the Cobb-Douglas Production Function in Activity Analysis," Review of Economic Studies, Oxford University Press, vol. 23(1), pages 27-31.
    6. Richmond, Amy K. & Kaufmann, Robert K., 2006. "Is there a turning point in the relationship between income and energy use and/or carbon emissions?," Ecological Economics, Elsevier, vol. 56(2), pages 176-189, February.
    7. A. C. Pigou & Milton Friedman & N. Georgescu-Roegen, 1936. "Marginal Utility of Money and Elasticities of Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 50(3), pages 532-539.
    8. Islam, Saiful, 1985. "Effect of an essential input on isoquants and substitution elasticities," Energy Economics, Elsevier, vol. 7(3), pages 194-196, July.
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    More about this item

    Keywords

    dimensions; logarithmic function; curve fitting; logarithmic specification;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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