Online Economics

How to do research

  • Keep the ass to the chair. (James Buchanan)
  • Everything has been thought before, but the problem is to think of it again. (Goethe)
  • Concepts without perceptions are empty; perceptions without concepts are blind. (Kant)
  • Mathematics has no symbols for confused ideas. (George Stigler)
  • All models are wrong but some are useful. (George Box)
  • Far better an approximate answer to the right question, which is often vague, than an exact answer to the wrong question, which can always be made precise. (J. Tukey)
  • The paradox is now fully established that the utmost abstractions are the true weapons with which to control our thought of concrete fact. (A. Whitehead)
  • "So you can create these tables?" she asked him. "In a form suitable for a TeX file?" TeX, pronounced like "Tech," is a computer program that's used for typesetting technical papers and books. "No," said Turner. "I don't do TeX. I do Troff (a comparable program). I guess I'll have to learn it, though. It's an invention of the devil." (M.D. Lemonick The Light at the Edge of the Universe)
  • To be is to classify is to act, all of which means throwing away information. So just the act of knowing requires ignorance. (Stuart Kauffman)
  • Art is a lie that helps us see the truth. (Picasso)
  • When we gather information from the world, we contribute to its entropy and hence its unknowability. (Otto Rossler)

Dynamics: are we all dead in the long-run?

  • In the long-run, there's just another short-run. (Abba Lerner)
  • It is difficult to think of words other than perhaps ``struggle'' which are more of an incitement to idle chatter than is the word ``dynamic.'' ... to claim your theory to be dynamic often allows you to get away with murder. (Frank Hahn)

The dismal science?

  • Prayer may not be very efficient when compared to celestial mechanics, but it surely holds its own vis--vis some parts of economics. (Paul Feyerabend)
  • McCrimmon, having gotten Grierson's attention, continued: "A breakthrough, you say? If it's in economics, at least it can't be dangerous. Nothing like gene engineering, laser beams, sex hormones or international relations. That's where we don't want any breakthroughs." (J.K. Galbraith A Tenured Professor)

Econometrics: alchemy or science?

  • Someone once said about partisan analysts that they use economic data the way a drunkard uses a lamppost: for support rather than illumination. Or as Disraeli put it, there are three kinds of lies: lies, damn lies, and statistics. (Paul Krugman)
  • Theories are testable where they are least needed, and are not testable where they are most needed. (Charles Manski)
  • If you torture the data long enough, Nature will confess. (Ronald Coase)
  • There are two things you are better off not watching in the making: sausages and econometric estimates. (Edward Leamer)
  • Doing econometrics is like trying to learn the laws of electricity by playing the radio. (Guy Orcutt)
  • Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes. (Charles Goodhart)
  • The four golden rules of econometrics:
    1. Think brilliantly,
    2. Be infinitely creative,
    3. Be outstandingly lucky,
    4. Otherwise, stick to being a theorist

    (David Hendry)

  • A good empirical study requires three components:
    1. A concise and sensible theoretical framework that is related to the questions to be asked,
    2. Reasonably good data, and
    3. An experiment or an event or a set of circumstances that give the data a chance to answer the questions asked. In short, the model needs to be identifiable from the data at hand.

    (Zvi Griliches)

  • Time series regression studies give no sign of converging toward the truth. (Phillip Cagan)
  • Any time series regression containing more than four independent variables results in garbage (Zvi Griliches)
  • Forecasting is like trying to drive a car blindfolded and following directions given by a person who is looking out of the back window (Anonymous)
  • Given the choice between Bob Solow and an econometric model to make forecasts, I'd choose Bob Solow; but I'd rather have Bob Solow with an econometric model, than Bob Solow without one (Paul Samuelson)
  • Keep in mind the three most important aspects of real data analysis: compromise, compromise, and compromise. (Edward Leamer)
  • The professional preoccupation with unit roots and cointegration has created an enormous diversion of intellectual resources toward issues that are very unimportant for three reasons:
    1. The sharp hypotheses of unit roots and cointegration are completely uninteresting from the standpoint of economics. By the time that there is any difference between one and .99, numerous changes in the economy will have occurred, rendering the original model completely irrelevant. My advice: Don't test for unit roots and cointegration. Estimate dynamic relationships.
    2. Energy spent looking for unit-roots would be better spent trying to understand the myriad unique events that we call history, thus generating an appreciation of why the future is a lot more blurry than most of our simple time-series models admit. For example: what about the rise in the divorce rate and the disappreance of the nuclear family, fast food franchises, school lunch/breakfast programs, forzen foods/refrigeration, and so on and so on??
    3. The statistical sampling theory supporing the search for unit-roots is misguided. The likelihood function corresponding to dynamic models has no special pathologies and requires no special treatment, except possibly the initial observation.


  • Two cheers for the market, not three. (Arthur Okun)

Game Theory

  • Life can only be understood backwards, but it must be lived forwards. (Kierkegaard)


  • In explaining why she felt our relationship had problems, a former girlfriend (an English teacher) told me that the problem was that I was so ... so ... reasonable. (David Colander)

Compensating differentials

  • My MIT colleague Robert Solow once remarked of another Nobel laureate, "[One] difference between Milton and myself is that everything reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out of the paper." Hmmm ... what does that say about me? (Paul Krugman)
  • Hiroyuki (junior sexist): "Women are difficult."
    Jack Johnston (senior sexist): "NO! They are impossible!"
  • In the western world there are only two comical things, the Christian Church and naked women ... Everything else tells us we are dead. (John Updike)