Why functional form matters: Revealing the structure in structural models in econometrics

Philosophy of Science 74 (5):1033-1045 (2007)
Abstract
This paper argues that econometricians' explicit adoption of identification conditions in structural equation modelling commits them to read the functional form of their equations in a strong, nonmathematical way. This content, which is implicitly attributed to the functional form of structural equations, is part of what makes equation structural. Unfortunately, econometricians are not explicit about the role functional form plays in signifying structural content. In order to remedy this, the second part of this paper presents an interpretation of the functional form based on Herbert Simon's definition of causal order. This begins to set out just what the functional form of structural equations represents. ‡I would like to thank Nancy Cartwright and attendants at UCSD Graduate Seminar 2006 for helpful comments. I also want to thank the AHRC for supporting the research for this paper. †To contact the author, please write to: Centre for Philosophy of Natural and Social Science, London School of Economics, London WC2A 2AE, United Kingdom; e-mail: d.j.fennell@lse.ac.uk.
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