February 10, 2010
Austrian econometrics

I'm not trying to pick a fight, nor trying to churn activity for DoL, as I have been (correctly) accused of doing in the past. This is an honest, serious question.

Why aren't Austrian economists testing their hypotheses using non-parametric statistical methods?

I fully understand the old chestnut about the difference between uncertainty and sheer ignorance. I get it, and I respect the insight. Sheer ignorance, taken seriously, markedly reduces the usefulness of ordinary, parametric statistics.

Even so, Austrian economists are social scientists and work to find ways to empirically test hypotheses.

So why not use non-parametric statistical methods? Many of these methods are non-parametric precisely because they do not make assumptions about the structure of "what we don't know," nor do they assume things about the nature of the underlying distribution of the data. In short, these methods take uncertainty seriously.

If more Austrians adopted non-parametric hypothesis testing as their empirical platform, I could see several advantages. One big one is that Austrians could then have theoretically supportable use of all of the secondary data that orthodox economists use, i.e., more testing of more hypotheses at lower cost. Another big advantage--rightly or wrongly--would be broader publishing access. One could still say Austrian things and test Austrian hypotheses, but the statistics would be a veil, making the work more palatable to orthodox economists who would otherwise (1) reject the paper as referees, or (2) fail to read the papers as the audience.

I'm interested in your thoughts: noelecon@gmail.com , please, not my university email address.

Posted by Noel Campbell at 11:39 AM

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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