Full text: Study week on the econometric approach to development planning

Professors ALLAIS and HAAVELMO comment upon econometric 
models from the point of view of epistemology, the genera] theory 
of knowledge. The main point I wish to make in my reply is that 
this is a highly important aspect of econometric model building. 
Several of the much debated issues about econometric models are not 
specific to econometrics, they are fundamental issues in the 
social sciences by and large; and many of the econometric techniques 
are pioneering in the still wide realm of nonexperimental model 
As to the first part of Professor ALLAIS’ comment, I would like 
to emphasize the sharp distinction between on the one hand the 
hypotheses that constitute the theoretical part of a model, on the 
other hand the actual facts that the model serves to explain. There 
is always a pluralism of models, and there is never perfect agreement 
between a model and the facts as actually observed. The choice 
between different types of model is to a large extent a matter of 
economy of thought, to quote ERNsT MacH. More specifically, it is 
often a matter of choosing the model that uses the smallest number 
of parameters when representing the facts. I do not think that at 
this point there is really any difference between our views. And 
similarly with the last part of Professor ALLAIS’ comment. Expe- 
rience has shown that it is sometimes (and in economics quite often) 
convenient and useful to approach the reality by way of models 
where time is a discrete variable, but if it turns out that if discrete 
time gives rise to difficulties, then of course we. should respecify 
time as a continuous variable. 
Professor HAAVELMO’s comments and five question marks have 
direct bearing on the epistemological foundations of econometrics: 
more specifically a bearing upon econometrics as nonexperimental 
model building. This is a most important topic for our round table 
discussion, and I welcome his remarks so much the more as they 
give me an opportunity to state agreement all through, except 
perhaps on one point which I think requires some qualification 
Wold - pag. 63

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