SEMAINE D'ETUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC. 
Ro 
tionship between productivity and research and development, 
it is fairly clear that one exists. Further study should show 
where the main opportunities lie. 
THE METHODS OF ESTIMATION 
Like the relationships of the model, the methods of estim- 
ation go through various stages of development. This is true 
both of the initial values and of the parameters. The typical 
procedure is to start either with existing estimates or with the 
econometric analysis of past observations. The parameters in 
both the consumption functions and the input-output relation- 
ships vary systematically with time, and so the next step is 
to calculate their values in 1970. These results are then scru- 
tinised with the help of casual empirical knowledge to see how 
far they seem sensible, and some adjustments are made. Fi- 
nally they are discussed, whenever possible, with outside ex- 
perts, and further adjustments are made. So far we have not 
got much beyond the early stages of this process; in particular. 
our main attack on the last stage is only just beginning. 
Let me now illustrate this sequence by outlining the methods 
of estimation we have used in the order in which they occur 
in the calculations. 
a) Exogenous final demand. 
This category can be divided into five components. 
1) Private consumers’ expenditure. Here we began vy 
applying the model consisting of (IV. 20), (IV. 21) and (IV. 24), 
and a similar model which makes use of quadratic trends, to 
eight major groups of expenditure. The parameters were estim- 
ated from annual data covering the period 1goo-1g60 with 
the exception of the years 1914-1919 and 1940-1947. This 
was done by means of an iterative, two-stage, least-squares pro- 
cedure. as follows. 
11 Stone - pag. 61