Lars P. Syll

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Applied econometrics — a messy business The applied econometrician is like a farmer who notices that the yield is somewhat higher under the trees where birds roost, and he uses this for evidence that bird droppings increase the yield. However, when he presents his findings … another farmer … objects that he used the same data but came up with the conclusion that moderate amounts of shade increase the yields … A bright chap … then observes that these two hypotheses are indistinguishable,...

Variable selection — not about having a ‘good fit’ Which independent variables should be included in the equation? The goal is a “good fit” … How can a good fit be recognized? A popular measure for the satisfactoriness of a regression is the coefficient of determination, R2. If this number is large, it is said, the regression gives a good fit … Nothing about R2 supports these claims. This statistic is best regarded as characterizing the geometric shape of the regression points and not much...

Should we ‘control for’ everything when running regressions? No way! 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...

To a mainstream economist, theory means model, and model means ideas expressed in mathematical form. In learning how to “think like an economist,” students learn certain critical concepts and models, ideas which typically are taught initially through simple mathematical analyses. These models, students learn, are theory. In more advanced courses, economic theories are presented in more mathematically elaborate models. Mainstream economists believe proper models – good models – take a...

Sherlock Holmes på besök i högskolevärlden På en av landets största högskolor kunde man igår på dess hemsida läsa att “Bra studiemiljö positivt för studieresultatet.” Woah! Vem hade kunnat ana det …

Simpson’s paradox and perspectival realism Which causal relationships we see depend on which model we use and its conceptual/causal articulation; which model is bestdepends on our purposes and pragmatic interests. Take the case of Simpson’s paradox, which can be described as the situation in which conditional probabilities (often related to causal relations) are opposite for subpopulations than for the whole population. Let academic salaries be higher for economists than for sociologists,...

What is a good model? Whereas increasing the difference between a model and its target system may have the advantage that the model becomes easier to study, studying a model is ultimately aimed at learning something about the target system. Therefore, additional approximations come with the cost of making the correspondence between model and target system less straight- forward. Ultimately, this makes the interpretation of results on the model in terms of the target system more...

Sir David Hendry on the inadequacies of DSGE models In most aspects of their lives humans must plan forwards. They take decisions today that affect their future in complex interactions with the decisions of others. When taking such decisions, the available information is only ever a subset of the universe of past and present information, as no individual or group of individuals can be aware of all the relevant information. Hence, views or expectations about the future, relevant for their...

And the waltz goes on  [embedded content] (h/t Jeanette Meyer) Absolutely fabulous!!