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Pastimes : Austrian Economics, a lens on everyday reality
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From: TimF4/6/2010 7:22:17 PM
1 Recommendation   of 445
 
"...As you may know, I don’t think much of the official methodology in macroeconomics. Many of my fellow economists seem to have a Popperian view of the social sciences. You develop a model. You go out and get some data. And then you try to refute the model with some sort of regression analysis. If you can’t refute it, then the model is assumed to be supported by the data, although papers usually end by noting “further research is necessary,” as models can never really be proved, only refuted.

My problem with this view is that it doesn’t reflect the way macro and finance actually work. Instead the models are often data-driven. Journals want to publish positive results, not negative. So thousands of macroeconomists keep running tests until they find a “statistically significant” VAR model, or a statistically significant “anomaly” in the EMH. Unfortunately, because the statistical testing is often used to generate the models, and determine which get published, the tests of statistical significance are meaningless..."

themoneyillusion.com
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