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description=15 posts published by Lars Syll during October 2015;

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Text of the page (random words):
ter the bridging the endemic lack of predictive success of the econometric project indicates that this hope of finding fixed parameters is a hope for which there really is no other ground than hope itself real world social systems are not governed by stable causal mechanisms or capacities as keynes wrote in his critique of econometrics and inferential statistics already in the 1920s emphasis added the atomic hypothesis which has worked so splendidly in physics breaks down in psychics we are faced at every turn with the problems of organic unity of discreteness of discontinuity the whole is not equal to the sum of the parts comparisons of quantity fails us small changes produce large effects the assumptions of a uniform and homogeneous continuum are not satisfied thus the results of mathematical psychics turn out to be derivative not fundamental indexes not measurements first approximations at the best and fallible indexes dubious approximations at that with much doubt added as to what if anything they are indexes or approximations of the kinds of laws and relations that econometrics has established are laws and relations about entities in models that presuppose causal mechanisms being atomistic and additive when causal mechanisms operate in real world social target systems they only do it in ever changing and unstable combinations where the whole is more than a mechanical sum of parts if economic regularities obtain they do it as a rule only because we engineered them for that purpose outside man made nomological machines they are rare or even non existant unfortunately that also makes most of the achievements of econometrics as most of contemporary endeavours of mainstream economic theoretical modeling rather useless following our recent post on econometricians traditional privileging of unbiased estimates there were a bunch of comments echoing the challenge of teaching this topic as students as well as practitioners often seem to want the comfort of an absolute standard such as best linear unbiased estimate or whatever commenters also discussed the tradeoff between bias and variance and the idea that unbiased estimates can overfit the data i agree with all these things but i just wanted to raise one more point in realistic settings unbiased estimates simply don t exist in the real world we have nonrandom samples measurement error nonadditivity nonlinearity etc etc etc so forget about it we re living in the real world it s my impression that many practitioners in applied econometrics and statistics think of their estimation choice kinda like this 1 the unbiased estimate it s the safe choice maybe a bit boring and maybe not the most efficient use of the data but you can trust it and it gets the job done 2 a biased estimate something flashy maybe bayesian maybe not it might do better but it s risky in using the biased estimate you re stepping off base the more the bias the larger your lead and you might well get picked off if you take the choice above and combine it with the unofficial rule that statistical significance is taken as proof of correctness in econ this would also require demonstrating that the result holds under some alternative model specifications but p less than 05 is still key then you get the following decision rule a go with the safe unbiased estimate if it s statistically significant run some robustness checks and if the result doesn t go away stop b if you don t succeed with a you can try something fancier but if you do that everyone will know that you tried plan a and it didn t work so people won t trust your finding so in a sort of gresham s law all that remains is the unbiased estimate but hey it s safe conservative etc right and that s where the present post comes in my point is that the unbiased estimate does not exist there is no safe harbor just as we can never get our personal risks in life down to zero there is no such thing as unbiasedness and it s a good thing too recognition of this point frees us to do better things with our data right away andrew gelman share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky economics journals publishing lazy non scientific work 27 oct 2015 at 11 00 posted in economics 1 comment in a new paper andrew chang an economist at the federal reserve and phillip li an economist with the office of the comptroller of the currency describe their attempt to replicate 67 papers from 13 well regarded economics journals their results just under half 29 out of the remaining 59 of the papers could be qualitatively replicated that is to say their general findings held up even if the authors did not arrive at the exact same quantitative result for the other half whose results could not be replicated the most common reason was missing public data or code h d vinod an economics professor at fordham university noted that caution could be outweighed by the sheer amount of work it takes to clean up data files in order to make them reproducible it s human laziness he said there s all this work involved in getting the data together bruce mccullough said he thought the authors definition of what counted as replication achieving the same qualitative as opposed to quantitative results was far too generous if a paper s conclusions are correct he argues one should be able to arrive at the same numbers using the same data what these journals produce is not science he said people should treat the numerical results as if they were produced by a random number generator anna louie sussman share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky why non existence of uncertainty is such a monstrously absurd assumption 26 oct 2015 at 16 04 posted in economics 1 comment all these pretty polite techniques made for a well panelled board room and a nicely regulated market are liable to collapse at all times the vague panic fears and equally vague and unreasoned hopes are not really lulled and lie but a little way below the surface perhaps the reader feels that this general philosophical disquisition on the behavior of mankind is somewhat remote from the economic theory under discussion but i think not tho this is how we behave in the marketplace the theory we devise in the study of how we behave in the market place should not itself submit to market place idols i accuse the classical economic theory of being itself one of these pretty polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future i dare say that a classical economist would readily admit this but even so i think he has overlooked the precise nature of the difference which his abstraction makes between theory and practice and the character of the fallacies into which he is likely to be led this is particularly the case in his treatment of money and interest john maynard keynes share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky question the monetary system and you re academically dead 25 oct 2015 at 18 11 posted in economics 10 comments bernard lietaer is a former professor of international finance and president at the central bank of belgium share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky did keynes accept the is lm model 25 oct 2015 at 09 02 posted in economics comments off on did keynes accept the is lm model lord keynes has some interesting references and links for those wanting to dwell upon the question if keynes really accepted hicks s is lm model my own view is that is lm doesn t adequately reflect the width and depth of keynes s insights on the workings of modern market economies 1 almost nothing in the post general theory writings of keynes suggests him considering hicks s is lm anywhere near a faithful rendering of his thought in keynes s canonical statement of the essence of his theory in the famous 1937 quarterly journal of economics article there is nothing to even suggest that keynes would have thought the existence of a keynes hicks is lm theory anything but pure nonsense john hicks the man who invented is lm in his 1937 econometrica review of keynes general theory mr keynes and the classics a suggested interpretation returned to it in an article in 1980 is lm an explanation in journal of post keynesian economics self critically he wrote that the only way in which is lm analysis usefully survives as anything more than a classroom gadget to be superseded later on by something better is in application to a particular kind of causal analysis where the use of equilibrium methods even a drastic use of equilibrium methods is not inappropriate what hicks acknowledges in 1980 is basically that his original is lm model ignored significant parts of keynes theory is lm is inherently a temporary general equilibrium model however much of the discussions we have in macroeconomics is about timing and the speed of relative adjustments of quantities commodity prices and wages on which is lm doesn t have much to say 2 is lm forces to a large extent the analysis into a static comparative equilibrium setting that doesn t in any substantial way reflect the processual nature of what takes place in historical time to me keynes s analysis is in fact inherently dynamic at least in the sense that it was based on real historic time and not the logical ergodic non entropic time concept used in most neoclassical model building and as niels bohr used to say thinking is not the same as just being logical 3 is lm reduces interaction between real and nominal entities to a rather constrained interest mechanism which is far too simplistic for analyzing complex financialised modern market economies 4 is lm gives no place for real money but rather trivializes the role that money and finance play in modern market economies as hicks commenting on his is lm construct had it in 1980 one did not have to bother about the market for loanable funds from the perspective of modern monetary theory it s obvious that is lm to a large extent ignores the fact that money in modern market economies is created in the process of financing and not as is lm depicts it something that central banks determine 5 is lm is typically set in a current values numéraire framework that definitely downgrades the importance of expectations and uncertainty and a fortiori gives too large a role for interests as ruling the roost when it comes to investments and liquidity preferences in this regard it is actually as bad as all the modern microfounded neo walrasian new keynesian models where keynesian genuine uncertainty and expectations aren t really modelled especially the two dimensionality of keynesian uncertainty both a question of probability and confidence has been impossible to incorporate into this framework which basically presupposes people following the dictates of expected utility theory high probability may mean nothing if the agent has low confidence in it reducing uncertainty to risk implicit in most analyses building on is lm models is nothing but hand waving according to keynes we live in a world permeated by unmeasurable uncertainty not quantifiable stochastic risk which often forces us to make decisions based on anything but rational expectations keynes rather thinks that we base our expectations on the confidence or weight we put on different events and alternatives to keynes expectations are a question of weighing probabilities by degrees of belief beliefs that often have preciously little to do with the kind of stochastic probabilistic calculations made by the rational agents as modeled by modern social sciences and often we simply do not know 6 is lm not only ignores genuine uncertainty but also the essentially complex and cyclical character of economies and investment activities speculation endogenous money labour market conditions and the importance of income distribution and as axel leijonhufvud so eloquently notes on is lm economics one doesn t find many inklings of the adaptive dynamics behind the explicit statics most of the insights on dynamic coordination problems that made keynes write general theory are lost in the translation into the is lm framework given this it s difficult to see how and why keynes in earnest should have accepted hicks s construct share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky bayesianism a scientific cul de sac 24 oct 2015 at 20 27 posted in statistics econometrics 2 comments one of my favourite problem situating lecture arguments against bayesianism goes something like this assume you re a bayesian turkey and hold a nonzero probability belief in the hypothesis h that people are nice vegetarians that do not eat turkeys and that every day i see the sun rise confirms my belief for every day you survive you update your belief according to bayes rule p h e p e h p h p e where evidence e stands for not being eaten and p e h 1 given that there do exist other hypotheses than h p e is less than 1 and a fortiori p h e is greater than p h every day you survive increases your probability belief that you will not be eaten this is totally rational according to the bayesian definition of rationality unfortunately as bertrand russell famously noticed for every day that goes by the traditional christmas dinner also gets closer and closer for more on my own objections to bayesianism bayesianism a patently absurd approach to science bayesianism preposterous mumbo jumbo one of the reasons i m a keynesian and not a bayesian keynes and bayes in paradise share on facebook opens in new window facebook share on x opens in new window x share on bluesky opens in new window bluesky next page recent posts arbetslöshetssiffran som styr den ekonomiska politiken 50 år efter studenten personal finding the late student stuff love s secret stein s paradox a lesson on precision and unbiasedness audioholic summer research ett välförtjänt bottenrekord arbetslösheten inte statsskulden är problemet how credible is the credibility revolution in econometrics randomness and representativeness are not the same lönebildning och arbetslöshet i sverige nancy cartwright s contributions to the philosophy of science what does randomisation guarantee nothing model reification in statistics and econometrics why democracy outperforms dictatorship comments policy i like comments follow netiquette comments especially anonymous ones with pseudo argumentations abusive language or irrelevant links will not be posted and please remember being a full time professor leaves only limited time to respond to comments recent comments jan wiklund on arbetslöshetssiffran som styr jan milch on arbetslöshetssiffran som styr jan milch on 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