Friday, September 7, 2012

So, What is Econometrics?

Over the years there have been many attempts to define what we mean by the term "Econometrics". I guess we all have our favourites. Mine comes from one of the most influential econometricians of our time - David Hendry:


"Unfortunately, I must now try to explain what "econometrics" comprises. Do not confuse the word with "econo-mystics" or with "economic-tricks", nor yet with "icon-ometrics". While we may indulge in all of these activities, they are not central to the discipline. Nor are econometricians primarily engaged in measuring the heights of economists."
 

 Hendry then continues:
"A more accurate idea of the subject is provided in the constitution of the Econometric Society, founded in 1930, which defined its main objectives as "the advancement of economic theory in its relation to statistics and mathematics" (Econometrica, 1933, p. 1). In this broad sense, econometrics commences an analysis of the relationships between economic variables (such as quantities and prices, incomes and expenditures, etc.) by abstracting the main phenomena of interest and stating theories thereof in mathematical form. The empirical usefulness of the resulting "models" is evaluated using statistical information of supposed relevance, and econometrics in the narrow sense (used hereafter) concerns the interpretation and analysis of such data in the context of "established" economic theory."
 
 
Hendry (1980, p. 381).

Reference

Hendry, D. F., 1980.  Econometrics - Alchemy or Science?. Economica, 47, 387-406.


© 2012, David E. Giles

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