tag:blogger.com,1999:blog-2198942534740642384.post1485345566708005212..comments2018-11-11T23:20:36.128-08:00Comments on Econometrics Beat: Dave Giles' Blog: Let's Put the "ECON" Back Into MicroeconometricsDave Gileshttp://www.blogger.com/profile/05389606956062019445noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-2198942534740642384.post-50938040964366681982014-08-07T08:26:12.367-07:002014-08-07T08:26:12.367-07:00You were right, I couldn't resist the title. B...You were right, I couldn't resist the title. But I also can't think of any examples of what you're talking about. I'm surprised that the applied model would be the <i>less</i> nuanced, since case-specific details are available.isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-79688629498916278942013-07-15T10:44:52.463-07:002013-07-15T10:44:52.463-07:00This makes great sense and this conversation has b...This makes great sense and this conversation has been quite illuminating. Thank you, Prof.Benhttps://www.blogger.com/profile/03460160852554584365noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-19772562204681746482013-07-15T08:50:13.472-07:002013-07-15T08:50:13.472-07:00Ben - I agree totally. And often there are competi...Ben - I agree totally. And often there are competing theories, some of which may be "nested" (i.e., one is a restricted version of another). In part, it may come down to the motivation for estimating the model in the first place. Take your example - if the motivation is short-term forecasting, then the naive model may be your choice, especially if it seems to stand up well over sub-samples, etc. On the other hand, if your interest lies in getting a measure of the structural parameters (so you can address policy questions), then the theory-driven model would be what you need. But I'd still want it to fit the data well, and of course I'd want it to pass other model specification tests.<br /><br />As you'll have guessed by now, my concern is with theory used purely as "window dressing"! :-)<br />Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-27138062859065159582013-07-15T08:37:23.340-07:002013-07-15T08:37:23.340-07:00Hi, Professor, this is supremely helpful. Thank y...Hi, Professor, this is supremely helpful. Thank you. Let me push this a bit further. Suppose I, as a theory-aware empirical researcher, set up the inter-temporal optimization problem correctly and estimate the appropriate non-linear equation. Suppose I also fit the naive OLS model. Now, suppose after fitting the two models, I do some model evaluation and find that the latter model appears to fit the data better. What do I do now?<br /><br />I ask this bc I often see theory-driven models being estimate but their fit never being assessed. I think you would agree that assessing fit is important.<br /><br />Thank you!Benhttps://www.blogger.com/profile/03460160852554584365noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-79725578113118127572013-07-14T15:32:39.088-07:002013-07-14T15:32:39.088-07:00Ben - thanks for the comment. Let me give you an a...Ben - thanks for the comment. Let me give you an analogy. If you look back at my post on estimating an Euler equation using GMM (http://davegiles.blogspot.ca/2013/05/estimating-euler-equation-using-gmm.html) you'll see that the problem is set up as an inter-temporal optimization problem. The solution is in the form of a specific non-linear implicit equation, whose parameters have interesting interpretations. <br /><br />Now, suppose we went through the optimization, derived the Euler equation, and then said something like: <br />"Let's look at an empirical application of this. Clearly the theory tells us that consumption depends on the interest rate. Let's fit an OLS regression that explains Log(C(t)) in terms of r(t)."<br /><br />This is the sort of thing I'm complaining about in a lot of empirical microeconomic papers. There's a total "disconnect" between the theoretical section of the paper and the empirical application. The theory section is essentially "window dressing" for a very uninspiring piece of empirical work.<br /><br />Hope this helps!<br /><br />DGDave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-86843366097977114192013-07-14T08:42:37.758-07:002013-07-14T08:42:37.758-07:00Hi, Professor, thanks for your response. While it...Hi, Professor, thanks for your response. While it would be helpful for those of your readers, I included, who come from a statistics as opposed to economics or econometrics background who do not "see it" and therefore do not "know it when we see it", I understand your desire not to "point fingers".Benhttps://www.blogger.com/profile/03460160852554584365noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-4265359701508890012013-07-12T09:01:43.612-07:002013-07-12T09:01:43.612-07:00Ben - I'd prefer not to point the finger at in...Ben - I'd prefer not to point the finger at individuals. I think we all now it when we see it though.Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-55266564000089327682013-07-12T06:18:04.018-07:002013-07-12T06:18:04.018-07:00I have a question similar to John's but opposi...I have a question similar to John's but opposite in direction. Can you point to one or more journal articles that are "worst offenders" in this regard?Benhttps://www.blogger.com/profile/03460160852554584365noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-20783286601533047832013-07-11T20:01:23.801-07:002013-07-11T20:01:23.801-07:00You're right I couldn't resist the title.
...You're right I couldn't resist the title.<br />I do hope you are gaining readers from down under!!nottrampishttp://nottrampis.blogspot.com.aunoreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-36404814711011993442013-07-11T17:33:11.264-07:002013-07-11T17:33:11.264-07:00Best post in the blogosphere I've read in a lo...Best post in the blogosphere I've read in a long time. I've started to think that in some fields people have completely given up on economic theory and become nothing more than applied statisticians. I love a good paper that carefully ties together an economic theory and an estimation strategy. IO people still seem to do that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-69647883228128474562013-07-11T11:49:52.872-07:002013-07-11T11:49:52.872-07:00John - what about Deaton & Muellbauer: http://...John - what about Deaton & Muellbauer: http://www.jstor.org/stable/1805222?seq=8Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-69703970220646936902013-07-11T11:36:43.836-07:002013-07-11T11:36:43.836-07:00Can you point to a journal article that is a parag...Can you point to a journal article that is a paragon of empirical microeconometrics?Johnhttps://www.blogger.com/profile/01457388998903348000noreply@blogger.com