PRESTOPUNDIT -- "It's a team sport, baby!"

"Two economists, Deirdre McCloskey of the University of Illinois, and Stephen Ziliak of Roosevelt University, think their colleagues do a lousy job of making sense of figures, often falling prey to elementary errors. But their biggest gripe is that, blinded by statistical wizardry, many economists fail to think about the way in which the world really works .. " MORE. (via the Mises Blog). Quotable:

In medieval Holland, it was noted that there was a correlation between the number of storks living on the roof of a house and the number of children born within it. The relationship was so striking that, according to the rules of maths that govern such things, you could say with great confidence that the results were very unlikely to be merely random. Such a relationship is said to be “statistically significant”. But the Dutch folklore of the time that storks somehow increased human fertility was clearly wrong .. A failure to separate statistical significance from plausible explanation is all too common in economics .. Ms McCloskey and Mr Ziliak looked at all the AER articles in the 1990s, and found that more than four-fifths of them are guilty of the same sin. Indeed, so pervasive is the cult of statistical significance, say the authors, that ever more economists dispense altogether with the awkward question of whether the patterns they uncover have anything meaningful to say about the real world ..

Read an earlier version of the McCloskey & Ziliak paper here (pdf).

Posted by Greg Ransom | TrackBack