On the rationale for and scope of regression models in econometrics

Abstract

In a recent book Zellner (1982, p. 26) reviews some basic issues in econometrics, past and present. He recalls the discussion between Keynes and Tinbergen in the 1930s on the appropriateness of applying statistical methods to non-experimental economic time-series data, on the possible incorrect specification of relationships, and on the suitability of econometric methods and models for succesfull prediction and policy making; Zellner also briefly mentions a few other controversial basic issues in econometrics, viz. the causal interpretation of econometric models, the appropriateness of probability statements made in econometric analysis, and the claimed success of rather simple time-series models in comparison with elaborate econometric models. On many of these fundamental issues various conflicting opinions are still propounded in the literature. At the same time in most leading textbooks — that according to their titles deal with the foundations, principles, theory and analysis of models, methods and techniques of econometrics — many of the above-mentioned fundamental matters are not treated explicitly at all.