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Putting Econometrics in its Place

My 2006 book, Putting Econometrics in its Place, published by Edward Elgar Publishing, argued for a completely new approach to applied economics research. (Link to Elgar Website)

In applied work, the economics profession seems preoccupied with econometrics above all else.  Many economists seem to care more about demonstrating their econometric sophistication than making genuine advances in economic understanding.  This is an unsatisfactory state of affairs.  Indeed, after more than 30 years as an applied researcher, it is clear to me that most of the important lessons in applied economics come from simple observations and simple analyses - and not from econometric sophistication. 

The book argued that econometrics is not, and can never be, a 'universal solvent' for all problems in applied economics.  The reason for that is the pervasive signal-to-noise-ratio problem in econometrics, which is discussed in more detail here.

The book stresses that researchers with a genuine interest in applied economics must use a very wide range of research approaches in their applied work.  In addition to econometrics, this will include (inter alia): engineering economics, simulation, economic history, the history of economic thought, case studies, interviews, questionnaire surveys, intuition, metaphor, and, finally, innovative economics - an essential miscellany of research teachniques.  I am clear that we can learn far more by combining these other approaches with some simple econometric analysis, than from econometrics alone - however sophisticated that econometrics may be.

Some of my most recent work tried to turn the message of this book into a practical agenda for researchers in applied economics.  You can read more about that here.