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Econometrics in a Formal Science of EconomicsTheory and the Measurement of Economic Relations$
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Bernt P. Stigum

Print publication date: 2014

Print ISBN-13: 9780262028585

Published to MIT Press Scholarship Online: September 2015

DOI: 10.7551/mitpress/9780262028585.001.0001

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Scientific Explanation in Economics and Econometrics

Scientific Explanation in Economics and Econometrics

Chapter:
(p.279) 9 Scientific Explanation in Economics and Econometrics
Source:
Econometrics in a Formal Science of Economics
Author(s):

Bernt P. Stigum

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262028585.003.0009

In philosophy, a scientific explanation has four components: a family of sentences, H, to be explained, a list of antecedent conditions, a list of general laws, and arguments that demonstrate that H is a logical consequence of the antecedent conditions and the laws. The chapter explains why such a characterization of scientific explanations is of little use in economics, and presents two different formal characterizations of logically and empirically adequate scientific explanations – one (SE1) for economics and one (SE2) for econometrics. In SE1, H is a family of sentences; the antecedent conditions are axioms of the data universe; the laws are axioms or theorems of an empirically relevant economic theory; and the arguments are the arguments of first-order logic. In SE2, H is a family of statistical relations; the antecedent conditions are axioms of a data universe; the laws are axioms or theorems of an empirically relevant economic theory; and the arguments are the arguments of mathematical statistics. The chapter exemplifies the two schemes with an SE1-explanation of regularities in experimental economics and with an SE2-explanation of regularities in a financial market in which the statistical arguments of formal econometrics are contrasted with the statistical arguments of present-day econometrics.

Keywords:   scientific explanation, Hempel’s DNS, laws, antecedent conditions, logically adequate, empirically adequate, cointegration space, observed regularities, experimental economics, financial markets

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