Saturday, May 18, 2013

Cookbook Econometrics - Reprise

A few days ago I was looking at my copy of Econometric Foundations, written by Ron Mittelhammer, George Judge, and Doug Miller. It's an excellent book, by the way.

I noticed, for the first time, that on p.xxviii of the Preface they have the following to say, under the heading of "A Comment":

"Many view econometrics as a potpourri or bag of tricks, and the cookbook metaphor for econometrics textbooks has become commonplace. Unfortunately, this philosophy can produce analysts who know a list of econometric recipes but who have insufficient understanding of which techniques to apply in a given situation or how to interpret the results of an application properly. As the inventory of econometric procedures has grown, the importance of understanding when it is appropriate to apply each econometric procedure, as well as knowing the appropriate interpretation of the results, has grown more than proportionately. The number of reference works that describe the growing inventory has expanded pari passu. These reference works will be accessible to the well-trained analyst who has mastered the basic philosophy and principles on which econometrics is founded. However, analysts who have done little more than memorize the recipes in conceptual econometric cookbooks will find the growing literature on new econometric methods impenetrable. Our goal is for you to be able to determine or create the econometric procedures that are applicable to your problem and then be able to apply them empirically and interpret the results appropriately. This is what this book is about, and this is what we think modern graduate econometrics instruction should be about."
I don't know Doug Miller personally, but I do know and respect  Ron and George, and so I wasn't surprised to find myself punching the air and shouting saying, "YES!"

I had similar things to say in a post  couple of years ago, and I won't repeat them all here.

Yes, I enjoy helping readers by providing "how-to-do-it" posts (such as this one on testing for Granger causality). Judging by the feedback, these posts appear to be widely appreciated - thanks! However,  I'm just as committed to fostering a clear understanding of:

  • The assumptions that are needed to get our standard econometric results
  • The connections between many of the "tools" that we use
  • How to approach problems we haven't met before - in a sensible way
  • Why some econometric tools work better than others
  • The history and intuition that provide the foundation for much of what we do in econometrics
  • Motherhood and apple pie
  • The crucial importance of data quality
O.K. - enough harping on for now!

© 2013, David E. Giles

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