Lars P. Syll

The vanity of rigour in economics Reasoning is the process whereby we get from old truths to new truths, from the known to the unknown, from the accepted to the debatable … If the reasoning starts on firm ground, and if it is itself sound, then it will lead to a conclusion which we must accept, though previously, perhaps, we had not thought we should. And those are the conditions that a good argument must meet; true premises and a good inference. If either...

The implicit argument in favor of representative-agent models as empirically relevant to aggregate economic data runs something like this: a representative-agent model is not itself an acceptable representation of the whole economy … but it is a first step in a program which step by step will inevitably bring the model closer to the agent-by-agent microeconomic model of the whole economy … I call this argument eschatological justification: it is the claim that there is a...

‘New Keynesian’ nonsense taught at our economics departments What can the central bank do to counter the bad animal spirits? If it cuts [real interest rate] r(t) below [rate of time-preference] n, even temporarily, we know there exists no rational expectations equilibrium in which there is always full employment. All we know is that we must have negative equilibrium growth in consumption for as long as r(t) remains below n. It is not obvious to me how...

OECD: Det fria skolvalet leder till ökad ojämlikhet Elevers bakgrund och hemförhållande betyder allt mer för skolresultaten. Den enskilda elevens klassbakgrund påverkar numera skolresultaten mer i Sverige än i OECD-länderna i genomsnitt, och betydligt mer än exempelvis i USA … När det gäller effekten på resultatet av vilken skola eleven går på, så ligger Sverige på genomsnittet i OECD. Betydelsen av de andra elevernas hemförhållanden och bakgrund har...

How to save us from inferential mistakes when doing econometrics This is where statistical analysis enters. Validation comes in many different forms, of course, and much good theory testing is qualitative in character. Yet when applicable, statistical theory is our most powerful inductive tool, and in the end, successful theories have to survive quantitative evaluation if they are to be taken seriously. Moreover, statistical analysis is not confined to...

David Freedman — uncovering where the statistical skeletons are buried Invariance assumptions need to be made in order to draw causal conclusions from non-experimental data: parameters are invariant to interventions, and so are errors or their distributions. Exogeneity is another concern. In a real example, as opposed to a hypothetical, real questions would have to be asked about these assumptions. Why are the equations “structural,” in the sense that the...

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When I present this argument … one or more scholars say, “But shouldn’t I control for everything I can in my regressions? If not, aren’t my coefficients biased due to excluded variables?” This argument is not as persuasive as it may seem initially. First of all, if what you are doing is misspecified already, then adding or excluding other variables has no tendency to make things consistently better or worse … The excluded variable argument only works if you are sure your...

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RCTs in the Garden of Eden Suppose researchers come to a town and do an RCT on the town population to check whether the injection of a green chemical improves memory and has adverse side effects. Suppose it is found that it has no side effects and improves memory greatly in 95% of cases. If the study is properly done and the random draw is truly random, it is likely to be treated as an important finding and will, in all likelihood, be published in a major...