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Q: Economics and Statistics ( Answered ,   1 Comment )
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 Subject: Economics and Statistics Category: Reference, Education and News > Teaching and Research Asked by: qurious-ga List Price: \$5.00 Posted: 19 Nov 2003 14:41 PST Expires: 19 Dec 2003 14:41 PST Question ID: 278360
 ```What is econometrics? It's not in the dictionary, but this seems to be a widely used term. Can you give me a definition, and perhaps some examples and bounds for this new (?) field of study?```
 ```Hello. "Econometrics can be defined as the study in which the tools of economic theory, statistical inference and mathematics are systematically applied, using observed data, to the analysis of economic laws. It is therefore concerned with the "empirical determination of economic laws", Brown (1991). Economic theories are written in mathematical form and are then analyzed using statistical methods. If the observed data are found to be incompatible with the predictions of the theory, it is rejected. Theories are accepted if the data are found to fit the theory." source: Trinity College Dublin http://www.maths.tcd.ie/local/JUNK/econrev/ser/html/falk.html "Econometrics is a branch of economics that applies statistical methods to the empirical study of economic theories and relationships. It is as a form of mathematical economics. By being able to translate qualitative statements in quantitative measurements, statements can at least in principle be objectively proven, disproven, measured, and compared. Econometrics differs from statistics done in other fields since controlled experiments are often impractical, so econometics has to frequently deal with data as is." source: Wikipedia.org http://en2.wikipedia.org/wiki/Econometrics "Econometrics is the field of economics that is concerned with the application of mathematical statistics and the tools of statistical inference to the empirical measurement of relationships postulated by economic theory. That is, econometrics (hopefully) uses some clever combination of economic theory and mathematical statistics. Typically, application of econometric methods involves the following elements: # formulating an economic model appropriate to the questions to be answered; # reviewing the available statistical models and the assumptions underlying these models, and selecting the form most suitable for the problem at hand; # obtaining appropriate data, properly defined and matching the concepts of the economic model; # finding suitable computer software to enable the calculations necessary for estimating and testing the econometric model. The ultimate goal of an econometric exercise is to see whether an economic model is consistent with empirical (observed) behavior as reflected in the data." source: Uni-mannheim.de http://www.sfb504.uni-mannheim.de/glossary/metrics.htm ------- Basically, econometricians take economic data and try to create mathematical models that explains it. They also sometimes us their data and models to prove or disprove theorems that come from the general field of economics. As mentioned above in the Wikipedia article, a very simple example of an econometric relationship is: Personal Expenditure = Propensity to Spend * Income + random error An econometrician would try to use actual data from the economy to figure out the real mathematical relationship, if any, between these variables. Often, econometrics involves creation of very elaborate models. There are literally thousands of examples of econometric models on the internet. See the results of this Google search: "an econometric model" example ://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22an+econometric+model%22+example&btnG=Google+Search ---------- As for the bounds and future of econometrics, a lot of the information on that subject is highly technical, but basically there's a general trend toward improved data collection techniques and more sophisticated computer models. Here's a good paper on this subject: "Laws and Limits of Econometrics," hosted by Yale University: http://cowles.econ.yale.edu/P/cd/d13b/d1397.pdf (The document is in PDF format, so the Adobe Acrobat Reader is required. If you don't have that, visit: http://www.adobe.com/products/acrobat/readstep2.html ) ------ search strategy: "econometrics is" "an econometric model", example "future of econometrics" I hope this helps.``` Clarification of Answer by juggler-ga on 19 Nov 2003 15:48 PST ```Sorry for that typo: "... create mathematical models that explain it."```
 qurious-ga rated this answer: and gave an additional tip of: \$2.00 `Great answer.`
 ```Thank you for the tip. -juggler```