A little knowledge can be dangerous

ON YOUR Business page of December 14, Joe Gill referred quite disparagingly to “number cruncher geeks” as “number jockeys”.

Economists try to philosophise verbally about the main cycles that underlie the business world.

Econometricians tend to rely more on the structures and trends in economic datasets.

The main difference between the two is that one is general but qualitative, while the other is specific and quantitative. Econometrics is not necessarily the servant of economics.

The world has a shortage of good practitioners of either discipline. Both sides need to co-operate more respectfully and to stop taking pot-shots at one another. Economists will always find scapegoats when their reasoning fails.

I do not advocate the robotic use of mathematical recipe books of formulae to solve economic problems.

Too little background knowledge is dangerous in the hands of amateurs who use computer spreadsheets packages unthinkingly.

Analysts need a clear theoretical understanding of the mathematical methods that they use and the limitations of those methods.

I tend to analyse economic data from a purely econometric viewpoint.

The ultimate test is pragmatic.

If an econometric model has worked up to now within an acceptable margin of error, then continue to use it. It may not be possible to be both an economist and an econometrician at the exact same time. An econometrician’s best epitaph might be ‘gloriously misunderstood’.

Michael Mernagh

Raheens

Carrigaline

Co Cork