Making and Breaking Rules in Applied Econometrics

Abstract

The lead article in Volume 1, Issue 1, Journal of Economic Surveys, 1987 was Adrian Pagan’s ‘Three Econometric Methodologies: A Critical Appraisal’. Reprinted in Oxley et al. (1995) Surveys in Econometrics, and updated in the same volume as ‘Three Econometric Methodologies: An Update’, the Journal quickly established an interest in papers that addressed the important issue of econometric methodology. Michael McAleer’s 1994 Journal paper entitled ‘Sherlock Holmes and the Search for Truth: A Diagnostic Tale’ (also reprinted in Oxley et al., 1995), and Dharma Dharmapala’s ‘On the History and Methodology of Econometrics’, published in 1993, added to the Journal’s growing portfolio of excellent papers published in this general area. It is fitting, therefore, that the current debate sparked by Peter Kennedy’s ‘Sinning in the Basement’ paper be published in the Journal. It is illuminating to re-read Pagan (1987, 1995) and see how far we have progressed. Adrian Pagan reminds us that although methodological debate in economics is almost as long-standing as the discipline itself (quoting John Stuart Mill, 1967): ‘it was not until the Fifth World Congress of the Econometric Society in 1985 that a session was devoted to methodological issues’ (p. 3). It is also interesting to note Adrian’s highlighting of several of J. S. Mill’s views on methodology. In particular: At the same time he (Mill) emphasized that, in many instances, it was easier to practice a science than to describe how one was doing it. He finally concluded that a better understanding of scope and method would facilitate the progress of economics as a science, but that sound methodology was not a necessary condition for the practice of sound methods. ‘Get on with the job’ seems the appropriate message. (p. 3). This issue of the Journal contains contributions to the methodology of applied econometrics, and are presented in the Occasional Contributions section. The