Re: [Pen-l] Question on overdetermination

["Jim Devine" <jdevine03@xxxxxxxxx>]

Jurriaan:
>> This is a radical anti-reductionism. The problem is that if everything
>> causes everything else, it makes causal analysis impossible, since by
>> that very fact it becomes impossible to specify how everything causes
>> everything else. It's a banality which is given an air of profundity.
>> All we are left with is metaphysical speculations about social order
>> and social change, which are never empirically verifiable.

Sabri:
> And this is what is happening! Does supply determine demand or demand
> determine supply? ...

In partial-equilibrium economic theory, it's neither. S&D are supposed
to be independent of each other, so that they determine price and
quantity together. If we stay at the level of theory, it's possible
that S&D determine each other, but then you've gotten into general
equilibrium theory and/or you've exited standard neoclassical theory.

BTW, it's common to equate the "banality" of the "overdetermination
school" to which Jurriaan refers to that of general equilibrium
theory, in which "everything is determined by everything else."

> This is the current state of econometrics in my view!

Econometrics tells us that what's important is for there to be
exogenous factors on both the supply and demand sides (and different
exogenous factors on the different sides) for there to be any kind of
meaningful result.

Of course, to my mind, there are no exogenous variables, except lagged
values of endogenous variables. That says that econometrics is quite
limited in its application, even by its own standards.

I have not been keeping track of econometrics during the last 30
years, but a lot of it (ARIMA, etc.) seems to be crude empiricism,
akin to factor analysis.

> "The experiments of statistics are repeatable but the experiments of
> econometrics are not. This is the difference between the two!"

The way I was taught it was that econometrics was used because it was
so difficult to do controlled experiments in economics. Econometrics
really doesn't involve experiments. Of course, now some economists
actually do experiments. They then use econometrics to interpret the
data.
-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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