Real-World Economics Review

from Richard Vahrenkamp Since 1945, the United States had experienced a unique innovation push with the computer, the nuclear weapon, new air combat weapons and the transistor within just a few years. These innovations were accompanied by Game Theory and Operations Research in the academic field. Widely–held is the view that computers supplemented the mathematical concepts of Game Theory and Operations Research and gave these fields a fresh impulse. Together, they established the view of...

from Lars Syll Asset price distributions are of great practical significance for portfolio managers. Standard finance theory assumes that asset price changes follow a normal distribution—the well-known bell curve. That this assumption is roughly accurate most of the time allows analysts to use very robust probability statistics. For example, for a sample that follows a normal distribution, you can identify the population average and characterize the likelihood of variance from that...

from Asad Zaman Excerpt from:  Real Statistics (3/4) Statistics as Rhetoric  {Preliminary material explains that conventional approach statistics separates theory and application — the job of ths statistician is to analyze numbers – without knowing where the come from. The job of the Field Expert is to use objective statistical analysis of numbers to get better understanding of the realities which generate the numbers. In “Real Statistics”, we assert that these two tasks cannot be...

from Lars Syll There’s a huge debate going on in social science right now. The question is simple, and strikes near the heart of all research: What counts as solid evidence? … Prominent statisticians, psychologists, economists, sociologists, political scientists, biomedical researchers, and others … argue that results should only be deemed “statistically significant” if they pass a higher threshold. “We propose a change to P< 0.005,” the authors write. “This simple step would...

from Dean Baker Mark Zuckerberg may not think he needs a new job, but he does. It’s long past time Facebook be classified as a publisher, where it can be held responsible for the content that appears in posts on its system. The issue here is the special exemption to liability that Facebook and other internet platforms get from Section 230 of the Communications Decency Act of 1996. This law was passed in the early days of the internet and was intended to set up rules for governing...

from Ikonoclast The only real science is hard science; namely physics, chemistry and biology. The rest is not science. This is not to insist on mere scientism nor is it to insist that other subjects are worthless. It is simply to insist on the precision of definition for which those (mistakenly) arguing for precise science and mathematics in economics are in effect calling. Those calling for precise science and mathematics in economics become hoist on their own petard if they use, at any...

from Lars Syll By the time that we have arrived at the peak first climbed by Arrow and Debreu, the central question boils down to something rather simple. We can phrase the question in the context of an exchange economy, but producers can be, and are, incorporated in the model. There is a rather arid economic environment referred to as a purely competitive market in which individuals receive signals as to the prices of all goods. All the individuals have preferences over all bundles of...

from Gerald Holtham Econometrics like more casual empiricism can be done well or badly, intelligently or stupidly, dogmatically or with an open mind. But are these gentlemen saying that statistical analysis can never reveal anything in economics that is not obvious to simple observation? Evidently that is untrue. What is revealed is never a “law” and will obviously be contingent in space and time. That follows from the nature of society and economic data. Statistical analysis nevertheless...

from Blair Fix, Jonathan Nitzan and Shimshon Bichler    But there is a slight conceptual problem. It turns out that the growth of real GDP – ostensibly a single, objective quantity – is highly sensitive to our choice of base year. To illustrate, consider a hypothetical economy that produces only two commodities: 1,000 lb of tomatoes and two laptops. Next, let’s choose 1990 as our base year and assume that tomatoes in that year cost $2/lb while a laptop costs $2,000. In this case, real...

from Lars Syll A modern economy is a very complicated system. Since we cannot conduct controlled experiments on its smaller parts, or even observe them in isolation, the classical hard-science devices for discriminating between competing hypotheses are closed to us. The main alternative device is the statistical analysis of historical time-series. But then another difficulty arises. The competing hypotheses are themselves complex and subtle. We know before we start that all of them, or at...