Tag Archives: econometrics

This is important but may be too wonkish for those who are not intimately familiar with econometrics. So let me try to simplify it and universalize it. The basic idea in logical reasoning is that an argument is sound if and only if the premises are true and the logical form is valid.  Then the conclusion follows as necessarily true. This is the basis of scientific reasoning. In modeling, a set of assumptions, both substantive and procedural, is stipulated, that is, assumed to be...

Over the twenty years that I have been pursuing an Islamic approach — focusing on the production of USEFUL knowledge, I have managed to heal all three of these divides. This happens naturally, when you focus on solution of real world problems. You automatically need to combine information coming from many different specialization areas. You need to use reasoning and also intuition. You also need to use both theory and its applications to the real world experiences. This leads to substantial...

Abstract Professor Yasuhiro Sakai (see 2016; 2018) has argued that there is an mysterious problem in the A Treatise on Probability, 1921 in chapter 3 on page 39 (page 42 of the 1973 CWJMK edition). He argues that there is an unsolved mystery that involves this diagram that has remained unexplained in the literature. The mystery is that Keynes does not explain what he is doing in the analysis involving the diagram starting on the lower half of page 38 and ending on page 40 of chapter III....

Keynes and the fundamentals of probability.Lars P. Syll’s BlogTruth and probabilityLars P. Syll | Professor, Malmo University

I believe that these corrosive moral claims derive from a fundamentally flawed understanding of how market capitalism works, grounded in the dubious assumption that human beings are “homo economicus”: perfectly selfish, perfectly rational, and relentlessly self-maximizing. It is this behavioral model upon which all the other models of orthodox economics are built. And it is nonsense. The last 40 years of research across multiple scientific disciplines has proven, with certainty, that homo...

Since econometrics doesn’t content itself with only making optimal predictions, but also aspires to explain things in terms of causes and effects, econometricians need loads of assumptions — most important of these are additivity and linearity. Important, simply because if they are not true, your model is invalid and descriptively incorrect. And when the model is wrong — well, then it’s wrong.... Simplifying assumptions versus oversimplification.Lars P. Syll’s BlogThe main reason why almost...

One of the more puzzling aspects of neo-classical economic theory is the assertion that profits are zero in equilibrium under the conditions that are assumed for many models. One should re-interpret this statement as "excess profits" are zero, but there are still some awkward aspects to the treatment of profits in standard macro models. This article works through the theory of profits for an example dynamic stochastic general equilibrium (DSGE) model, and discusses the difficulties with the...

Jonathan Larson quote.Lars P. Syll’s BlogEconometric disillusionment Lars P. Syll | Professor, Malmo UniversityAlsoDebunking mathematical economics

Quote by Silvia Merler/Bruegel mentioning Lars, with a shoutout to Brian Romanchuk.Lars P. Syll’s BlogThe DSGE quarrel Lars P. Syll | Professor, Malmo UniversityMore from LarsEconomic history — a victim of economics imperialism Empirical economics and statistical power

To put it another way: Sure, it’s fine to say that you “cannot reach external validity” from your sample alone. But in the meantime you still need to make decisions. We don’t throw away the entire polling industry just cos their response rates are below 10%; we work on doing better. Our samples are never perfect but we can make them closer to the population. Remember the Chestertonian principle that extreme skepticism is a form of credulity. Making assumptions is necessary. However, it is...