Transforming structural econometrics: substantive vs. statistical premises of inference

Abstract

ABSTRACTHow could one transform structural econometrics with a view to deliver empirical models that generate reliable inferences and trustworthy evidence for or against theories or claims, as well as provide trustable guidance for economic policy makers? Nell and Errouaki, in Rational Econometric Man: Transforming Structural Econometrics, put forward their proposal on how to achieve that, by discussing the effectiveness of alternative proposals in the literature. There is a lot to agree with in this book, but the primary aim of this note is to initiate the dialogue on issues where opinions differ on how to transform structural econometrics. The discussion focuses on what I consider a crucial aspect of empirical modeling—statistical adequacy—but the authors question its practical usefulness for empirical modeling. I will attempt to make a case that ‘methodological institutionalism’ cannot be properly implemented without employing the notion of statistical adequacy.