Lars P. Syll

Keynes’ critique of econometrics — as valid today as it was in 1939 Renowned ‘error-statistician’ Aris Spanos maintains — in a comment on this blog a couple of weeks ago — that Keynes’ critique of econometrics and the reliability of inferences made when it is applied, “have been addressed or answered.” One could, of course, say that, but the valuation of the statement hinges completely on what we mean by a question or critique being ‘addressed’ or...

Thus your standard New Keynesian model will use Calvo pricing and model the current inflation rate as tightly coupled to the present value of expected future output gaps. Is this a requirement anyone really wants to put on the model intended to help us understand the world that actually exists out there? Thus your standard New Keynesian model will calculate the expected path of consumption as the solution to some Euler equation plus an intertemporal budget constraint, with...

On the non-validity of incremental validity A common goal of statistical analysis in the social sciences is to draw inferences about the relative contributions of different variables to some outcome variable. When regressing academic performance, political affiliation, or vocabulary growth on other variables, researchers often wish to determine which variables matter to the prediction and which do not—typically by considering whether each variable’s...

Lindeberg-Levy CLT (student stuff)  [embedded content]

A philosophical look at economics Owing to the elegance of explanations in natural science, scientists in other disciplines are likely to be tempted to emulate this success. While that is a good thing in the sense of striving to observe the four criteria or coherence, correspondence, practicality and economy, it is not a good thing if scientists doing life or social science become unmindful of the limitations imposed by the subject matter of their...

The wide conviction of the superiority of the methods of the science has converted the econometric community largely to a group of fundamentalist guards of mathematical rigour. It is often the case that mathemical rigour is held as the dominant goal and the criterion for research topic choice as well as research evaluation, so much so that the relevance of the research to business cycles is reduced to empirical illustrations. To that extent, probabilistic formalization has...

And one day there will be no more frontier (personal) [embedded content] In loving memory of my brother, Peter ‘Uncas’ Pålsson.

Statistical inference — a self-imposed limitation The tool of statistical inference becomes available as the result of a self-imposed limitation of the universe of discourse. It is assumed that the available observations have been generated by a probability law or stochastic process about which some incomplete knowledge is available a priori … It should be kept in mind that the sharpness and power of these remarkable tools of inductive reasoning are bought...

Economics — more like phrenology than physics What made phrenology so popular was what also made economics so popular at the time: it gave a rationale for a society based on Progress and also provided a blueprint for how this could be achieved. The phrenological doctrine, being so vague in its pronouncements, was highly malleable and could be used to justify whatever those in power needed justifying. So, for example, in 19th century England phrenology was...

My recent research with Carine Nourry and Alain Venditti argues that while there are strong reasons for believing there are no free lunches left uneaten by bonus-hungry market participants, there are really no reasons for believing that this will lead to Pareto efficiency, except, perhaps, by chance … In our model environment, booms and crashes occur simply as a consequence of the animal spirits of market participants. Why should we care if there are big movements in the...