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

The purpose of building a model of anything is to under- 
stand how the thing works and, if possible, to make it work 
better. As BALL has argued [2] in reviewing the model of 
sconomic growth that I and my colleagues are working on in 
Cambridge, the great thing is to make a start and to follow 
this up by intensive work on the less satisfactory components 
of the initial version. It is a mistake to try to perfect all the 
components at the outset. Such an attempt may easily result 
in no model at all, for one never achieves initially a degree of 
oerfection in the components that makes one entirely happy 
about leaving them alone. Furthermore, as he says, the ade- 
quacy of particular types of relationship can never be properly 
judged in isolation but should be evaluated in terms of their 
role in the complete model. Our motto. therefore, is solvitur 
[he decisions to be taken in building a model can be 
grouped under four main headings: a) the variables with which 
‘he model is concerned; b) the relationships by means of which 
‘he variables are connected and the precise form that these 
relationships are to take; c) the statistical and other methods 
oy which the parameters in the relationships are to be estim- 
ated; and d) the methods of numerical analysis to be used in 
calculating the parameters and the unknown elements in the 
svstem. Let us now look at each heading in turn. 
a) Variables. The basic concepts of economics are pro- 
duction. consumption and accumulation. to which mav be 
"11 Stone - pag. 7

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