by From Imad Moosa Econometrics is no longer about measurement in economics as it has become too abstract. The word “econometrics” is typically stretched to cover mathematical economics and the word “econometrician” refers to an economist, or otherwise, who is skilled and interested in the application of mathematics, be it mathematical statistics, game theory, topology or measure theory. Baltagi (2002) argues that research in economics and econometrics has been growing more and more abstract and highly mathematical without an application in sight or a motivation for practical use. In most cases, however, mathematization is unnecessary and a simple idea that can be represented by diagrams is made much more complex and beyond the comprehension of the average economist, let alone policy
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from Imad Moosa
Econometrics is no longer about measurement in economics as it has become too abstract. The word “econometrics” is typically stretched to cover mathematical economics and the word “econometrician” refers to an economist, or otherwise, who is skilled and interested in the application of mathematics, be it mathematical statistics, game theory, topology or measure theory. Baltagi (2002) argues that research in economics and econometrics has been growing more and more abstract and highly mathematical without an application in sight or a motivation for practical use. In most cases, however, mathematization is unnecessary and a simple idea that can be represented by diagrams is made much more complex and beyond the comprehension of the average economist, let alone policy makers.
Heckman (2001) argues that econometrics is useful only if it helps economists conduct and interpret empirical research on economic data. Like Baltagi, Heckman warns that the gap between econometric theory and empirical practice has grown over the past two decades. Although he finds nothing wrong with, and much potential value in, using methods and ideas from other fields to improve empirical work in economics, he does warn of the risks involved in uncritically adopting the methods and mind set of the statisticians. Econometric methods adapted from statistics are not useful in many research activities pursued by economists. A theorem-proof format is poorly suited for analyzing economic data, which requires skills of synthesis, interpretation and empirical investigation. Command of statistical methods is only a part, and sometimes a very small part, of what is required to do useful empirical research.
The trend towards more abstract work can be seen in the contents of Econometrica. In the 1930s and 1940s, Econometrica published papers on economics, dealing with microeconomic issues like the demand for boots and macroeconomic issues like the multiplier effect of a balanced budget. In the 2012 and 2013 volumes, most of the papers are too abstract, use no data and do not provide new econometric methods that can be used in empirical work. In particular there is a high frequency of papers on game theory, which is supposed to be a branch of mathematics. Recent issues of Econometrica are dominated by what a frustrated academic economist once called “data-free mathematical masturbation”, suggesting that it was not his “source of enlightenment” (Mason et al., 1992). This is why a joke goes as follows: during the rule of Nicolai Ceausescu in Romania, the government banned all “western” economics journals – the exception was Econometrica because it had nothing to do with economics.