My instant reaction is that applied economists regard data as observable
when it can be measured or collected in a relatively theory-independent
manner. For example, the CPI consists of recording actual prices and
calculating an index number. While there are theoretical issues involved
of a statistical kind in the creation of the index, a specific economic
theory is not involved. That is not to say that economic theory is not
involved in the interpretation: for example, in the question of whether or
not the CPI is a good measure of "true" inflation. It is just to say that
people with opposing theoretical views can still look at the data as a
common object on which they can theorize. Constrast that with NAIRU, which
can only be recorded when one is willing to make a commitment to a
particular economic theory -- and different economic theories give clearly
different measures of NAIRU. It is interesting that economists sometimes
forget the provenance of their data. The U.S. Congressional Budget Office
publishes NAIRU data based on a particular theory, which is used by some
economists as an input to a analysis involving an inconsistent
theory. Observability on this standard surely admits of degrees, depending
on the level of theoretical commitment or, perhaps, forms families of
relatively shared theoretical commitments.
Kevin Hoover
At 04:21 PM 11/15/2004 +0000, you wrote:
>----------------- HES POSTING -----------------
>Dear list members,
>
>I would be very interested in your opinion in the following matter. One
>frequently reads in econometric papers that certain economic variables
>(e.g. inflation, GDP, unemployment) are termed "observable" while others
>(e.g. the NAIRU, potential output, the causal effect of some x on some y)
>are called "unobservable". I have two questions about this:
>
>1) What do you think is the explanation for this difference/distinction?
>
>Please be as specific as possible (e.g. if you think it is a matter of
>direct vs indirect measurability, say exactly what that means; similarly
>if you think it's a matter of measurable vs estimable etc. etc.).
>
>2) What are the loci classici for discussions of the concept of observable
>IN ECONOMICS?
>
>Again, please be as specific as possible: I am NOT looking at testability,
>verfifiability, falsifiability etc. but observability. One place is
>certainly Oskar Morgenstern's On the Accuracy of Economic Observations.
>Uskali Maki sometimes talks about observables but I think he uses a
>different concept (according to which variables such as inflation would
>UNobservable).
>
>Many thanks!
>
>Julian Reiss
>
>
>
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"It has been my experience that folks who have no vices have very few
virtues."
Abraham Lincoln
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Kevin D. Hoover
Professor of Economics and Chair
Department of Economics
University of California
Davis, California 95616-8578
Tel. (530) 752-2129
Fax (530) 752-9382
E-mail: [log in to unmask]
Web page: http://www.econ.ucdavis.edu/faculty/kdhoover/index.html
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