Econometrics

This paper explores the potential of data mining as a technique that could be used by malicious data miners to threaten the privacy of social network sites users. It applies a data mining algorithm to a real dataset to provide empirically-based evidence of the ease with which characteristics about the SNS users can be discovered and used in a way that could invade their privacy. One major contribution of this article is the use of the decision forest data mining algorithm (...) to the context of SNS, which does not only build a decision tree but rather a forest allowing the exploration of more logic rules from a dataset. One logic rule that SysFor built in this study, for example, revealed that anyone having a profile picture showing just the face or a picture showing a family is less likely to be lonely. Another contribution of this article is the discussion of the implications of the data mining problem for governments, businesses, developers and the SNS users themselves. (shrink)

This survey of the symposium papers argues that the problem of data mining should be of interest to both practicing econometricians and specialists in economic methodology. After summarizing some of the main points to arise in the symposium, it draws on recent work in the philosophy of science to point to parallels between data mining and practices engaged in routinely by experimental scientists. These suggest that data mining might be seen in a more positive light than conventional doubts about it (...) imply. (shrink)

One of the most actively discussed aspects of Keynes's thought during the last decade has been his concern with uncertainty and probability theory. As the concerns of current macroeconomic theorists have turned increasingly to the effects of expectations and uncertainty, interest has grown in the fact that Keynes was the author of A Treatise on Probability and that uncertainty plays a prominent role in Chapter 12 of The General Theory as well as in three 1937 papers in which he summarized (...) The General Theory's main point. Not surprisingly, though, there has been very little agreement in this recent discussion about exactly what the significance of Keynes's early work in probability was to his later work as an economist, or about what the roles of uncertainty and expectations are in The General Theory. (shrink)

Cartwright (1989) and Humphreys (1989) have suggested theories of probabilistic causation for singular events, which are based on modifications of traditional causal linear modelling. On the basis of her theory, Cartwright offered an allegedly local, and non-factorizable, common-cause model for the EPR experiment. In this paper I consider Cartwright's and Humphrey's theories. I argue that, provided plausible assumptions obtain, local models for EPR in the framework of these theories are committed to Bell inequalities, which are violated by experiment.

Gregor Betz explores the following questions: Where are the limits of economics, in particular the limits of economic foreknowledge? Are macroeconomic forecasts credible predictions or mere prophecies and what would this imply for the way economic policy decisions are taken? Is rational economic decision making possible without forecasting at all?

Methodology of scientific research programs (MSRP), model-building and actor-network-theory (ANT) are woven together to provide a layered study of the Leontief paradox. Neil De Marchi's Lakatosian account examined the paradox within an Ohlin-Samuelson research program. A model-building approach rather highlights the ability of Leontief's input-output model to mediate between international trade theory and the world by facilitating an empirical application of the Heckscher-Ohlin Theorem. The epistemological implications of this model-building approach provide an alternative explanation of why Samuelson and other prominent (...) economists ignored the paradox. By focusing on the network in which input-output analysis evolved, Bruno Latour's ANT further explains the response of international trade theorists. (shrink)

To support my Phd theses and results of my grant research in 1999, I asked 1) prominent chemist Antonín Holý, author of substances to treat hepatitis and HIV, about the indivisibility of the art and science (published in Slovak Narodna Obroda and Czech blisty,cz), 2) the distinguished economist William Baumol about the alternative activities (published in Slovak Nove Slovo, Czech Respekt and blisty.cz), 3) Nobel Laureate Clive Granger about the significance of the economics (published in 2004 in Czech weekly Tyden). (...) The interviews were exhibited in Holland Park, W8 6LU, The Ice House between 18. Oct - 3. Nov. 2013. (shrink)

Since the mid?1950s the spread of formal models and econometric method has greatly improved the study of the past, giving rise to the ?new? economic history; at the same time, the influence of economic history on economists and economics has markedly declined. This paper argues that the contribution of history to the advancement of economics is still paramount, as is evident from the evolution of monetary theory and institutions.JEL classification: NO1, A12.

Davis argues that Suppe's semantic conception provides a better understanding of the problem of theory?data confrontations. Applying his semantic methodology to the LSE (London School of Economics) approach of econometrics, he concludes that the LSE approach fails to address the issue of bridging the theory?data gap. This paper suggests two other versions of the semantic view of theories in the philosophy of science, due to Suppes and van Fraassen, and argues that the LSE approach can be construed under these two (...) versions of the semantic view in terms of structure and representation. (shrink)

Immortality is a subject which has long been explored and imagined by science fiction writers. In his intriguing new study, Stephen R.L.Clark argues that the genre of science fiction writing allows investigation of philosophical questions about immortality without the constraints of academic philosophy. He reveals how fantasy accounts of issues such as resurrection, disembodied survival, reincarnation and devices or drugs for preserving life can be used as an important resource for philosophical inquiry and examines how a society of immortals might (...) function through a reading of the vampire myth. _How to Live Forever_ is a compelling study which introduces students and professional philosophers to the possibilities of using science fiction in their work. It includes extensive suggestions for further reading, both fictional and philosophical, and examines the work of such major science fiction authors as _Arthur C. Clarke, Frank Herbert, Larry Niven, William Gibson_, and _Colin Wilson_. (shrink)

In recent research, Davis (2005) has introduced the semantic conception of theories as a means of studying the differing practices of the Textbook and LSE approaches to econometric modelling. In this paper, Davis' (2005) use of the semantic view is examined, with close attention paid to the stated roles of the semantic notions of ?model dimensions? and ?bridging assumptions?. While comments concerning the latter are of a supportive nature, some concerns are raised in relation to Davis' use of model dimensions.

While there exist numerous applications of Kuhn's analysis of scientific revolutions to economics, there is yet to be an application to econometrics. The present paper addresses this via an analysis of the often-documented transition between the textbook and LSE methodologies witnessed in British time series econometrics. This exercise allows a number of issues to be raised. First, it will be questioned whether the observed transition in econometrics is an appropriate subject for analysis within the Kuhnian framework. This is the primary (...) concern of the paper. Second, the adoption of Kuhn's approach will allow the witnessed transition in econometric methodology to be viewed from a different perspective to that permitted by more conventional historical accounts. This is seen to lead a number of interesting conclusions. Third, implications of the present study for Kuhn's analysis will be discussed. (shrink)

A positive view of data-mining has been recently presented in a Journal of Economic Methodology ( JEM ) symposium. This is in stark contrast to the stance normally taken. In this note consideration of the Bayesian philosophy of science literature and the impact of data revision extends the analysis of data-mining. Introduction of these issues is seen to provide support for the arguments presented in the JEM symposium.

The philosophy of science literature has played an increasing role in discussion of econometric methodology in recent years, and the Hendry methodology in particular has received much attention. Despite this, the encompassing principle has been overlooked in the methodological literature. This paper addresses this by examining the major methodological implications of the principle.

Econometric Theory and Methods International Edition provides a unified treatment of modern econometric theory and practical econometric methods. The geometrical approach to least squares is emphasized, as is the method of moments, which is used to motivate a wide variety of estimators and tests. Simulation methods, including the bootstrap, are introduced early and used extensively. The book deals with a large number of modern topics. In addition to bootstrap and Monte Carlo tests, these include sandwich covariance matrix estimators, artificial regressions, (...) estimating functions and the generalized method of moments, indirect inference, and kernel estimation. Every chapter incorporates numerous exercises, some theoretical, some empirical, and many involving simulation. (shrink)

The reply by Cook and comment by Chao demonstrate Kuhn's thesis that different scientists place different values on different components of their common discipline. This fact is demonstrated by first succinctly summarizing Cook's and my original points within the framework of a simple choice model. I then respond to Cook and Chao. I close by offering some suggestions on how the Textbook/LSE debate could be moved forward.

In a recent article, Cook conducted a Kuhnian analysis of the difference between the Textbook and LSE econometric approaches. This paper uses a semantic conception of theories (Suppe 1989) and a finer gradation of the theory of reduction process to clarify the apparent puzzle that exist between the Textbook and LSE approaches to econometrics. The paper demonstrates that a Kuhnian analysis in isolation can be more misleading than realized.

Trygve Haavelmo's 1944 article ‘The Probability Approach in Econometrics’ is considered by most to have provided the foundations for present day econometrics (Morgan, 1990, Chapters 8 and 9). Since Haavelmo (1944), extraordinary advances have been made in econometrics. However, over the last two decades the efficacy and scientific status of econometrics has become questionable. Not surprisingly, the growing discontent with econometrics has been accompanied by a growing interest in econometric methodology.

When the economic theory of the last decades becomes a subject of reflection for historians of economic theory, a striking feature which they will have to explain is the demise of the disequilibrium concept. Previously, economists had no qualms concerning the view that the market or the economy was exhibiting disequilibria. Amongst many possible quotations, the following, drawn from Viner's well-known article on Marshall, illustrates that:.

In this paper we consider a Bayesian treatment of ‘Duhem's thesis’, the proposition that theories are never refuted on empirical grounds because they cannot be tested in isolation from auxiliary hypotheses about initial conditions or the operation of scientific instruments. Sawyer, Beed, and Sankey (1997) consider Duhem's thesis (and its restatement in stronger and weaker forms as the ‘Duhem-Quine thesis’) and its role in hypothesis testing, using four theories from economics and finance as examples. Here we consider Duhem's thesis in (...) the context of theory choice, econometric results, and the ‘farm problem’ in agricultural economics. This problem is defined as persistently low and highly variable prices, incomes, and returns in the agricultural sector as compared to the nonagricultural sector of the U.S. economy. The existence of the farm problem tends to refute an implication of general equilibrium (GE) theory — that resources flow to equate returns between sectors of the economy. We discuss Duhem's thesis in the context of demonstrating why evidence supporting the farm problem has not diminished the standing of general equilibrium theory among agricultural economists. (shrink)

This 1991 book is a selection of Jacques Drèze's work over the last decade on the topics of lasting unemployment, stagflation and unused capacity. At the theoretical level, the author has contributed to the formulation and analysis of general equilibrium models which allow for price rigidities and excess supply and lend themselves to econometric implementation, thus represents an attempt to integrate micro- and macroeconomics, and to use theory for empirical and policy purposes.

I comment on the controversy between McCloskey and Ziliak and Hoover and Siegler on statistical versus economic significance, in the March 2008 issue of the Journal of Economic Methodology. I argue that while McCloskey and Ziliak are right in emphasizing ?real error?, i.e. non-sampling error that cannot be eliminated through specification testing, they fail to acknowledge those areas in economics, e.g. rational expectations macroeconomics and asset pricing, where researchers clearly distinguish between statistical and economic significance and where statistical testing plays (...) a relatively minor role in model evaluation. In these areas models are treated as inherently misspecified and, consequently, are evaluated empirically by other methods than statistical tests. I also criticize McCloskey and Ziliak for their strong focus on the size of parameter estimates while neglecting the important question of how to obtain reliable estimates, and I argue that significance tests are useful tools in those cases where a statistical model serves as input in the quantification of an economic model. Finally, I provide a specific example from economics ? asset return predictability ? where the distinction between statistical and economic significance is well appreciated, but which also shows how statistical tests have contributed to our substantive economic understanding. (shrink)

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. (shrink)