Methodologies of positive economics - Keynes-Tinbergen debate
3 important questions on Methodologies of positive economics - Keynes-Tinbergen debate
What was the debate of Keynes and Tinbergen about?
Tinberen constructed the first two macroeconomic models. (using least squares)
- Keynes concluded that Tinberen ignored the technical aspects of econometrics in his model.
- Keynes concluded that Tinberen ignored the technical aspects of econometrics in his model.
What were the three concerns of Keynes regarding Tinbergen's macroeconomic models?
1. Estimates of the effect of causal factors are biased, since not all causal factors can be measured (omitted variable bias)
- According to Keynes; the technique of multiple correlation analysis, which was adopted by Tinbergen, was only a measurement method.
2. Too much trial and error, but with too little informed by theory (data mining). Also there was the problem of linearity of models
3. Problem of invariance: would the relationships foud also apply in the future? Everything changes constantly
What is the omitted variable bias accordiing to Keynes/Tinbergen?
When measuring is not done properly since not all causalities are known. When omitting a varible, the test correlations are far too high. (Don't know what you do not know)
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