Dark art of econometrics

Ross Gittins

…. the economics profession… with no disapprobation of dubious conduct is asking to have its reputation trashed.

Economists give no thought to ethics or other social norms of behaviour because such matters find no place in their neoclassical model.

To an economist it’s no insult to assume that businesses are motivated solely by a desire to maximise their profits. Would they sell their services to the highest bidder? Of course; it would be irrational to do otherwise.

Indeed, so far from worrying about ethics, there are some economists who believe it’s irrational to obey the law unless the chance of getting caught, combined with the size of the penalty, is sufficient to outweigh the benefits of breaking it.

….Does anyone believe it’s possible to buy an independent report?…

….The commissioning of special reports, the use of words such as «independent» and «respected», and the quoting of «point estimates» rather than ranges are intended to create an air of certainty and God’s truth revealed.

But everyone in the business knows econometric modelling exercises are as ropy as all get-out. In the jargon, they’re subject to significant limitations that fellow economists could argue over until the cows come home…..