Lars P. Syll

Statistical significance tests do not validate models The word ‘significant’ has a special place in the world of statistics, thanks to a test that researchers use to avoid jumping to conclusions from too little data. Suppose a researcher has what looks like an exciting result: She gave 30 kids a new kind of lunch, and they all got better grades than a control group that didn’t get the lunch. Before concluding that the lunch helped, she must ask the...

Why p-values cannot be taken at face value A researcher is interested in differences between Democrats and Republicans in how they perform in a short mathematics test when it is expressed in two different contexts, either involving health care or the military. The research hypothesis is that context matters, and one would expect Democrats to do better in the health- care context and Republicans in the military context … At this point there is a huge...

Mainstream economists dissing people that want to rethink economics There’s a lot of commenting on the blog now, after yours truly put up a post where Cambridge economist Pontus Rendahl in an interview compared heterodox economics to ‘creationism’ and ‘alternative medicine,’ and totally dissed students that want to see the economics curriculum moving in a more pluralist direction. Sad to say, Rendahl is not the only mainstream economist having monumental...

Econometrics and the bridge between model and reality Trygve Haavelmo, the “father” of modern probabilistic econometrics, wrote that he and other econometricians could not “build a complete bridge between our models and reality” by logical operations alone, but finally had to make “a non-logical jump” [‘Statistical testing of business-cycle theories,’ 1943:15]. A part of that jump consisted in that econometricians “like to believe … that the various a...

On the proper use of mathematics in economics One must, of course, beware of expecting from this method more than it can give. Out of the crucible of calculation comes not an atom more truth than was put in. The assumptions being hypothetical, the results obviously cannot claim more than a vey limited validity. The mathematical expression ought to facilitate the argument, clarify the results, and so guard against possible faults of reasoning — that is all....

Econometrics and the axiom of correct specification Most work in econometrics and regression analysis is — still — made on the assumption that the researcher has a theoretical model that is ‘true.’ Based on this belief of having a correct specification for an econometric model or running a regression, one proceeds as if the only problem remaining to solve have to do with measurement and observation. When things sound to good to be true, they usually aren’t....

DSGE modeling – a statistical critique As Paul Romer’s recent assault on ‘post-real’ macroeconomics showed, yours truly is not the only one that questions the validity and relevance of DSGE modeling. After having read one of my posts on the issue, eminent statistician Aris Spanos kindly sent me a working paper where he discusses the validity of DSGE models and shows that the calibrated structural models are often at odds with observed data, and that many of...

Rational choice theory … In economics it is assumed that people make rational choices

It is clearly the case that experienced modellers could easily come up with significantly different models based on the same set of data thus undermining claims to researcher-independent objectivity. This has been demonstrated empirically by Magnus and Morgan (1999) who conducted an experiment in which an apprentice had to try to replicate the analysis of a dataset that might have been carried out by three different experts (Leamer, Sims, and Hendry) following their published...

Sweden’s growing housing bubble House prices are increasing fast in EU. And more so in Sweden than in any other member state, as shown in the Eurostat graph below, showing percentage increase in annually deflated house price index by member state 2015: Sweden’s house price boom started in mid-1990s, and looking at the development of real house prices during the last three decades there are reasons to be deeply worried. The indebtedness of the Swedish...