A First Lesson in Econometrics (1970) [pdf]

https://www.uibk.ac.at/econometrics/lit/siegfried_jpe_70.pdf

by hkc • 5 years ago

145 59 5 years ago

uibk.ac.at

maccam912• 5 years ago

Was pleasantly surprised to find it a short humorous paper. If you want to learn econometrics, this will do more to prepare you for reading other papers than teach you anything.

hkc2• 5 years ago

You're right! It was a fun paper that I discovered while studying Econometrics in undergrad.

rluoy• 5 years ago

It seems that ! is missing in equation (12).

hkc2• 5 years ago

Right! Here's an updated version with corrections: https://www.latrobe.edu.au/__data/assets/pdf_file/0004/25186...

lelandfe• 5 years ago

The principle in question might best be described as Occam's yeast. It makes the obvious, but often overlooked, point that when something is expressed as simply as possible, it is often too terse to be easily understood

Pietertje• 5 years ago

And the power to delta

lowkeyokay• 5 years ago

This was made me laugh. So many times I read ‘it should then be obvious that…’ What the?! No it isn’t. Text book authors must hate students.

kurthr• 5 years ago

It is obvious to the "_most_ casual observer"... you need to get quite a bit more casual!

xtiansimon2• 5 years ago

Isn’t there a thing about how mathematicians and scientists in the 19th century would carefully explain as if the intended audience we’re laypeople. Where as in the 20th century academic writing and popular science writing diverged such that an academic writer could say such and such is obvious and be speaking to a very niche audience?

AnimalMuppet• 5 years ago

I heard of a prof who in a lecture said "It's obvious that..." and a student challenged him on it. "Is that really obvious?" The professor looked at the board for a minute, then left the room. 45 minutes later, the professor came back and said, "Yes, it's obvious!"

You keep using that word. I do not think it means what you think it means...

bachmeier2• 5 years ago

My monetary economics professor in grad school was teaching a paper and told us that when the authors claim it's obvious, that means it's not obvious. So he wrote out the derivation over the weekend and gave us a four-page, single-spaced handout with all the equations behind that single "obvious" result.

cinntaile• 5 years ago

This result is trivial so the derivation is left as an exercise.

boppo12• 5 years ago

This is way off topic but hopefully it will get allowed because I think you have the expertise to help:

It seems to me that the widely accepted practice of market stimulation by interest rate intervention has the cost of destroying price discovery. Also, that it is a primary cause of wealth inequality. These relationships seem to me actually obvious: push down DCF denominators and valuations go up, inefficient businesses stay in business and employ people digging holes. Sure, we get good jobs reports, but we also work harder to make less. Meanwhile those who hold wealth see its value increase disproportionate to 'actual' worth and common people who hold little or none can afford less and less of it. It seems like a pretty direct policy of 'rich get richer, poor get poorer'. Worse yet, as I look at the world around me, it all seems to support my hypothesis. Tesla, spacs, NFTs, housing, blackrock & vanguard & gates buying land, etc. I could go on and on with examples.

But the thing is, I got shitty grades in my college econ courses. It's laughable to me that all the highly educated people at central banks somehow haven't thought of this but I have. I'm being serious, I'm kind of a lazy idiot. By any reasonable measure, I expect that I'm wrong.

Could you point me in the direction of some primary sources that address the relationship between interest rate intervention and price discovery? I've been told to pick up an undergrad macro text, but those all just seem to say "low rates = easier to get loans = mo' jobz" without any rigor.

Open market ops and other interventions are so common and accepted, the only other people I see complaining are precious metals schizos. Surely there's a theoretical foundation for the policy/practice.

iaw• 5 years ago

I have a friend who was in grad school and found an "...and so it follows" proof that was in standard textbooks dating back decades. To this day he can't find anyone to fill in the remainder of the proof to get the result.

srean• 5 years ago

The confusion comes from the differences in what words like 'obvious', 'trivial' mean in Mathematics and what they mean in English. Same deal with the word 'significant' in Statistics and English.

I used to take swipes at Haskell and Category theory folks for their use of their ektomorphisms but later realized the point of using words that are not used in regular English.

In mathematics obvious/trivial means no new math or technique needs to be invented to go from this step to that step, it does not mean it would be easy. This is fairly standard usage.

ElDji• 5 years ago

Having followed engineering cursus THEN economics with econometry courses : this was the most WTF moments of my life.

photochemsyn2• 5 years ago

Econometrics is one of the most discredited branches of academics that exists. These were the people who were waving their models around in the early 1990s, trying to tell people that NAFTA would have no effect on manufacturing jobs in the United States. They also promoted elimination of Glass-Steagall and the deregulation of the housing market, resulting in the subprime fraud-based economic disaster of 2008.

There's a reason the neoclassical economists are hidden away in business schools, not in the actual science departments - it's because they'd have to endure the ridicule of anyone with basic training in science and math. When your models predict the opposite of what actually occurs, time and time again, well, you're supposed to recognize that there are fundamental flaws in them and go back to basics.

Imagine if, in the late 1970s, all the climate researchers had predicted several decades of global cooling thanks to human activity, and had turned out to be entirely wrong, yet made no effort to re-examine their basic assumptions about how the world works. That's what neoclassical economists are doing with their econometric model nonsense.

barrenko• 5 years ago

Not sure why you're downvoted.

bachmeier2• 5 years ago

Likely because it's a confused comment not having any relationship to the posted article, and it demonstrates lack of even a basic understanding of what econometrics is. (Source: I teach econometrics classes in a college of arts and sciences, which I share with math, statistics, physics, chemistry, and biology departments.)

aww_dang2• 5 years ago

This is a politicized issue.

crimsoneer• 5 years ago

This is silly. Econometrics is the basis for much of what we now call data science, and good causal inference. It has bugger all to do with nafta.

huitzitziltzin4• 5 years ago

This comment is totally uninformed and completely wrong.

Econometrics is the study of making inferences about economic models from data. Making inferences from data is fundamental to everything economists have done for a long time. Econometricians are essentially applied statisticians. Indeed, I can think of many econometricians I personally know who have joint appointments in university statistics departments. Your claim that they are "hidden in business schools" is completely incorrect.

Econometricians are unlikely to have made predictions about NAFTA. You provide no source for your claim that they did. Nor are they likely to have advocated against Glass-Steagall. You provide no evidence for this claim either.

If you think econometricians have no training in science or math, you are also totally and completely wrong. (Again: do you think so many econometricians would have joint appointments _in statistics departments_ if that were true?)

I would also invite you to visit any seminar in a prominent university economics department in the United States, not just the econometrics seminar. Outside of pure game theory, every seminar series in every department is thoroughly empirical: what is the data, how are the parameters in the model identified, etc.

Or go talk to the economists who work at any of the large tech firms! Facebook, Google, and Amazon all have economics groups. Amazon's is to my knowledge the largest. They hire many econometricians every year and have consulting relationships with many of the leading academic econometricians. Would they put so much money into "one of the most discredited branches of academics that exists"? No, they would not.

You don't have the slightest idea what you are talking about.

photochemsyn2• 5 years ago

'Econometric models' have so many levers and dials on them that they be tuned to forecast whatever their operator wants them to forecast. Hence they mainly serve as a marketing tool to defend policies that their sponsors desire to get through Congress or the next board meeting or whatever.

As far as things like model projections for NAFTA, any relatively simple search turns up dozens of references. Google Scholar isn't all that bad for this, select a custom range 1990-1994 and enter "econometric model 1992 NAFTA projections". There are dozens of results. For example:

Appendix B, Macroeconomic Simulations of NAFTA https://www.cbo.gov/sites/default/files/103rd-congress-1993-...

You can find the same for those seeking to justify the China WTO deal c.2000 but I don't recall reading much about forecasts of creating something called 'the Rust Belt' all across the once-industrial zone covering a third of the US, or the resulting job losses and economic regional malaise. Perhaps something is missing in the models?

lvl100• 5 years ago

I think you’re mainly focusing on macro and it’s not completely unwarranted. That said, micro stuff is fascinating to say the least, and very pertinent to data science. In fact, much of “data science” projects until 2012-13ish were handled by economists.

SantalBlush• 5 years ago

They're not just focusing on macro, they are confusing econometrics with economics. Econometrics has nothing to do with any specific economic theory; it is about statistical modelling.

hwers• 5 years ago

This is probably true but it's quite an angry response to the linked article which is mostly just a joke.

chermi• 5 years ago

I suspect you may have a point hidden within here, a point that I might even agree with...

But it's hard to understand that point and believe that you are discussing in good faith when you conflate things that you must know not to, given your implied knowledge. Econometrics (methodology) and neoclassical (school of thought) are on different "axes" if you will, if you were to try to decompose economics into into orthogonal components. I know that's a simplification

Could you perhaps critique econometrics on its own?

Edit 1 because I can't type

Edit 2 to add this comment -- aww_dangs comment like 2 below here and 2 deeper is the closest to the critique this guy wanted to give

imtringued7• 5 years ago

The problem with economics is that people make the assumption that money is primarily or even exclusively a medium of exchange. It's only since Keynes that everyone understood that it's not really true. However, if you were to tax cash with a 6% annual tax then the old classical period of economics would be quite relevant again.

motohagiography• 5 years ago

Funny, now do epidemiology.

tonmoy• 5 years ago

Equation 4 is obviously incorrect, right?

imtringued7• 5 years ago

Honestly, the first lesson in economics should be that there is no such thing as endless exponential growth.

This is a nice video that gets the point across: https://youtu.be/UI2Zs3QfzEI

MichaelRazum• 5 years ago

Are you sure about it? I mean so far you could describe the success of capitalism with exponential growth. Now you could argue that the earth resources are limited, but who knows if we gonna stay here forever. The universe is quite big...

imtringued7• 5 years ago

What I am really getting at is the dependence on growth. It's fine to have it but not to force it.

A First Lesson in Econometrics (1970) [pdf]

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