Rational Econometric Man

Rational Econometric Man

Transforming Structural Econometrics

Edward J. Nell and Karim Errouaki

This challenging and original book takes a fresh, innovative look at econometrics, and re-examines the scientific standing of structural econometrics as developed by the founders (Frisch and Tinbergen) and extended by Haavelmo and the Cowles modellers (particularly Klein) during the period 1930–1960.

Chapter 1: Re-reading Hollis and Nell

Edward J. Nell and Karim Errouaki

Subjects: economics and finance, econometrics

Extract

It will be suggested here that it is not too far-fetched to see Hollis and Nell’s (1975) Rational Economic Man as a scientific foundation for reconstructing structural econometrics, one might say, for ‘Rational Econometric Man’. To make this case, we shall have to take a detour, unfortunately, into the fundamentals of positivism, and then visit the secret laboratory containing the epistemological foundations of neoclassical economics. At the door of the laboratory there is a sign that reads: ‘No admittance unless you accept a twin allegiance: positivism and individualism’. On this visit, we do not intend simply to defend Hollis and Nell’s thesis, but we hope to give some support to the argument that their thesis provides foundations for econometrics. As mentioned earlier, Haavelmo (1958) has argued that weak theoretical neoclassical economic foundations rendered suspect the policy value of most econometric models. He devoted the end of his career tore-examining the neoclassical theory of investment (see Haavelmo, 1960).We start here with the following three observations.

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