Econometrics in a Formal Science of Economics
Theory and the Measurement of Economic Relations
An examination of the role of theory in applied econometrics.
Econometrics is a study of good and bad ways to measure economic relations. In this book, Bernt Stigum considers the role that economic theory ought to play in such measurements and proposes a formal science of economics that provides the means to solve the measurement problems faced by econometric researchers. After describing the salient parts of a formal science of economics, Stigum compares its methods with the methods of contemporary applied econometrics. His goal is to develop a basis for meaningful discussion of the best way to incorporate economic theory in empirical analysis.
Stigum conceives two scenarios for research in applied econometrics: contemporary econometrics in the tradition of Trygve Haavelmo and the formal theory-data confrontation envisioned by Ragnar Frisch. Stigum presents case studies of economic phenomena, contrasting the empirical analysis prescribed by contemporary applied econometrics with the empirical analysis prescribed by a formal theory-data confrontation. He finds significant and provocative differences. Which are we to believe when the statistical analyses of these two methodologies yield very different descriptions of the behavior characteristics of data variables and inferences about social reality?
Stigum points to three aspects of contemporary econometric methodology that may benefit from serious discussions: the analysis of positively valued time series, a suspect characteristic of qualitative response models, and the search for linearly cointegrated time series. These three aspects are of as much concern to formal econometrics as they are to contemporary econometrics.
Hardcover$19.75 S | £15.99 ISBN: 9780262028585 392 pp. | 6 in x 9 in 22 figures, 61 tables
This book crystallizes Stigum's deep investigation into the philosophical underpinnings of empirical economics. Here he contrasts theories of Frisch and Haavelmo and then his own that illuminate how we do econometrics today. The book is a complex read with nuggets along the way. Stigum may be the James Joyce of econometrics.
2003 Nobel Laureate, Economics
Econometrics in a Formal Science of Economics is the third volume in Bernt Stigum's development of a formal science of economics. In this volume Stigum successfully unifies the theoretical and empirical aspects of econometrics presented in the work of his illustrious predecessors at the University of Oslo—Ragnar Frisch and Trygve Haavelmo. In a tour de force he brings the formal science in direct contact with frontier issues in current econometric practice.
Samuel W. Morris University Professor of Economics, Harvard University
In his new book, Stigum proposes a formal and novel approach to the problem of confronting economic theory with data in the form of an axiomatic framework. This book is distinguished from other attempts to discuss the theory-data confrontation by several unique features: an extensive use of the axiomatic approach; a praiseworthy attempt to adapt the best theories of explanation, such as Hempel's, from philosophy of science to econometrics; an in-depth discussion of the roles of both theory and data in empirical modeling; and a commendable attempt to relate the proposed framework for empirical modeling to previous attempts by Frisch and Haavelmo and in the related literature.
Wilson E. Schmidt Professor of Economics, Virginia Tech