Open AccessLaws and Limits of Econometrics*
Author(s) -
Phillips Peter C. B.
Publication year - 2003
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/1468-0297.00114
Subject(s) - economics , foundation (evidence) , econometrics , law , law and economics , political science
We discuss general weaknesses and limitations of the econometric approach. A template from sociology is used to formulate six laws that characterise mainstream activities of econometrics and their scientific limits. We discuss proximity theorems that quantify by explicit bounds how close we can get to the generating mechanism of the data and the optimal forecasts of next period observations using a finite number of observations. The magnitude of the bound depends on the characteristics of the model and trajectory of the data. We look at one possible future of econometrics using advanced econometric methods interactively with a web browser.