by Summary:
In a previous article, I argued that having unknown fixed parameters within many economic models does not create much in the way of uncertainty: just extend the range of historical data available, and we can pin down the parameter values. This article covers a related case: what if we allow parameters to vary with time? This possibility will make it impossible to make reliable forecasts with the model. However, such models have another defect: they can be fitted to practically any data set, making the model non-falsifiable. This can be illustrated by thinking about the simplest model of stock index returns. My argument that the apparent success of mainstream macro modelling techniques relies on the use of such non-falsifiable models….Bond Economics Can We Falsify Models With Time-Varying
Topics:
Mike Norman considers the following as important: economic modeling, economics as science, falsifiability, scientific method
This could be interesting, too:
In a previous article, I argued that having unknown fixed parameters within many economic models does not create much in the way of uncertainty: just extend the range of historical data available, and we can pin down the parameter values. This article covers a related case: what if we allow parameters to vary with time? This possibility will make it impossible to make reliable forecasts with the model. However, such models have another defect: they can be fitted to practically any data set, making the model non-falsifiable. This can be illustrated by thinking about the simplest model of stock index returns. My argument that the apparent success of mainstream macro modelling techniques relies on the use of such non-falsifiable models….In a previous article, I argued that having unknown fixed parameters within many economic models does not create much in the way of uncertainty: just extend the range of historical data available, and we can pin down the parameter values. This article covers a related case: what if we allow parameters to vary with time? This possibility will make it impossible to make reliable forecasts with the model. However, such models have another defect: they can be fitted to practically any data set, making the model non-falsifiable. This can be illustrated by thinking about the simplest model of stock index returns. My argument that the apparent success of mainstream macro modelling techniques relies on the use of such non-falsifiable models….Bond Economics Can We Falsify Models With Time-Varying
Topics:
Mike Norman considers the following as important: economic modeling, economics as science, falsifiability, scientific method
This could be interesting, too:
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Bond Economics
Can We Falsify Models With Time-Varying Parameters?
Brian Romanchuk