24 thoughts on “Nerd alert

  1. Whats the point of econometrics and models without using it to compare the predictability of an econometric model to the reality of economic history? Are we always living in a dream of predictability (it will work in the future – just wait longer and see) or do we test predictive econometric models against the past to see how well they actually “did” predict before we try them on the future? (the test control for any predictive model for the future can only be history). Economic history? To think the prior Government tried to delete its code in the ABS, after first shifting it to humanities, as a legitimate field of research. They thought all academics were lefties and all economic historians were lefter than left communists (but that was JH for you…..complete nutter).

  2. Alice Says:

    Whats the point of econometrics and models without using it to compare the predictability of an econometric model to the reality of economic history?

    Um, what?

    …do we test predictive econometric models against the past to see how well they actually “did” predict before we try them on the future?

    What exactly do you think an “econometric” model is?

  3. Definition SJ#3 obtained from google (easily enough done)

    “An econometric model is a mathematical representation of relationships in the economy—often highly complex ones—expressed as equations. The equations explain how one economic variable can change as a result of changes in other key variables. For instance, an econometric equation could be derived to explain changes in saving behaviour over time as it is affected by trends in incomes and interest rates. Econometric models are not perfect, but they often provide an approximation that is useful when trying to understand and forecast changes in the economy.

    Researchers and policy-makers use econometric models extensively to understand what the implications on the economy would be if certain variables were changed. For instance, the savings equation discussed above could be used by the Bank of Canada to understand the effect of a potential interest rate hike on savings. To formulate an econometric model, the econometrician needs to apply knowledge of economics, mathematics, and statistics related to the problem.

  4. OK that didn’t work out.

    I assumed from #4 that you were trying to make a joke.

    Looks like you’re serious. I’ll revise the question to “how do you think an econometric model is derived”.

  5. Please dont try my patience SJ – from observation, which of course is based on history. Its not the observation or derivation phase I am concerned about (How many observations – how much history? How long?) – its the testing phase. Does it work well before we rush off and build it into Treasury models?? Did it predict well with 1950s, 60s, 70s, 80s, 90s, data and so on?? I suspect many neoliberal free market models were more hype than substance and did not incorporate thorough testing before implementation into Tresury models and I wonder how that happened. The perfect model that didnt quite work (failures now acknowledged by eminent economists). Before they try a new econometic model on real world policy, it might be better to test its predictive capacity more thoroughly first against economic historical data.

  6. Oh and SJ, I am not joking. JH tried to delete the study of economic history as a legitimate field of research. He who ignores the past is a fool.

  7. OK. I see that your problem is actually with something like “macroeconomic models from the Chicago school” rather that “econometric models”.

    There’s a nontrivial difference between the two.

    Can you tell me what it is?

  8. I did indeed expect “econometrics” in place of the word “history” and as it relates to the current methodology for teaching uni students most of whom manage to get their undergraduate degrees without the slightest understanding of Australian economic development, the great depression and other major milestones like the goldrush, the rail roll out, the drought at the turn of the century, the era of protectionsim in the 20s, the waves of migration and the history of economic thought (yes all those great dead economists). That is what universities now deliver JQ, and its only the sudents who want to get out (of economics) more!

  9. Sj – I am sorry but your line of questioning is becoming tediously boring to me and Ill have to end my participation here. You are not making a point.

  10. That’s OK, Alice. I was only trying to make you think more deeply about what you’re saying.

    Please don’t let me discourage you from commenting as often and as much you want to.

    Kindest regards

  11. SJ # 10

    The point is SJ 1) I proffer an opinion 2) you offer your opinion and disgree with mine based on your point of view 2) then discuss. I dont see any clarity in your line of questioning ie you have not offered your point of view before questioning mine. Its a matter of procedure and I dont have paranormal perception on what your views are.

  12. Actually SJ – I will take your point on board (even though your approach was somewhat obscure). I do draw a distinction between the Chicago school models and their derivatives and other econometric models. I think the former were ill thought out and hastily applied in something of a fervour (of economic theory fashion). I am yet to get to the bottom of the great overturning in economic theoretical models that occurred in the 60s/70s…I dont think it was for the best.

  13. I wonder how many readers, at the halfway point in this sentence, expected “econometrics” in the place of “history”? I think I need to get out more.

    Maybe. Or maybe it’s time for you to start work on a children’s fantasy series!

  14. I didn’t consider anything other than history- although history is pretty nerdish too. The Horrible Histories are a pretty good way to get children interested in history as they concentrate on those aspects beloved by children – all the horrible bits. It is a good series.

  15. oops – I missed the entire point. Its a book of time (novel series) not time series. I do need to get out more…. SJ – I know why you thought I was joking. Alas it was Friday night. Forgive my glass of wine before……. but one could be forgiven for thinking there was a conspiracy to replace history with econometrics.

  16. Thanks JQ, that makes me feel better. But Im still worried about SJ. I havent seen them since. SJ made me clarify myself once before in a quiet probing way, and quite rightly too, but I forgot about that, mistook SJ for a troll and misread the post completely….. so sorry SJ…..

  17. However, I still suspect there is a conspiracy (you should not have started this one JQ) and it started in the 1970s with the rise of the fashion for neo-classical economics within universities, to replace history with econometrics (yes, many of those who wanted to still examine policy or the long term view (history) got sacked and / or sidelined).

    It kept many in our profession busy advancing narrow neo classical mathematical models, and acted to silence too many economists in Australia from researching or criticising the longer term effect of economic policies. Its always worthwhile noticing who benefits most from the wellspring of certain economic ideas. There are useful theories and there are destructive theories in economics, like those that promote greed and self interest above all else, that still manage to deliver short term gains to someone. Economics is a battleground and economic ideas are the ammunition.

  18. Alice Says:

    But Im still worried about SJ.

    No need for that. This is something we can both have a giggle about at the next Time-travel-Series seminar in 1863. 🙂

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