Morning Must-Read: Steve Randy Waldmann: Mark Thoma Wrote the Wisest Two Paragraphs About Econometrics

you will read about econometrics and empirical statistical research in general:

You are testing a theory you came up with, but the data are uncooperative and say you are wrong. But instead of accepting that, you tell yourself ‘My theory is right, I just haven’t found the right econometric specification yet. I need to add variables, remove variables, take a log, add an interaction, square a term, do a different correction for misspecification, try a different sample period, etc., etc., etc.’ Then, after finally digging out that one specification of the econometric model that confirms your hypothesis, you declare victory, write it up, and send it off (somehow never mentioning the intense specification mining that produced the result). Too much econometric work proceeds along these lines. Not quite this blatantly, but that is, in effect, what happens in too many cases. I think it is often best to think of econometric results as the best case the researcher could make for a particular theory rather than a true test of the model.