Transforming Structural Econometrics
Chapter 11: Working with open models: lawlike relations and an uncertain future
Throughout earlier chapters we assessed the critiques of structural econometrics, and we examined its foundations. We found the critiques important but lacking, and argued that economic laws – relationships between scientific variables – could be defined for economics, but only for limited historical periods. There are indeed law like relationships to be discovered, although, unlike the laws of natural science, they are limited and bounded by history and geography. Moreover, they can change as a result of changes in institutions and technology. (But the processes of such change can themselves be explored.) And some relations must always be inherently volatile. Conceptual analysis and fieldwork provide a basis for defining the variables and hypothesizing the laws, while structural econometrics offered a method of estimating those laws, provided they were relationships of the reliable sort. We proposed the MTC as a methodology: fieldwork to establish relevance/applicability by coming to understand the concepts, rules and norms by which practice is guided; conceptual analysis to weave those concepts into theory; measurement and statistics in numbers that match the concepts of the (practiced-based)theory, making it possible to estimate the parameters of the law like relationships.
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