Elements Of Econometrics Kmenta Pdf Download

Jan Kmenta is the author of the internationally respected text The Elements of Econometrics 1 and co-editor of several books related to econometric model building. His published research over 40 years relates to many facets of econometric theory and practice, including the estimation of production functions, the evaluation of structural econometric models, and estimation in the face of missing data. This work has appeared in the leading journals of the profession. A 1966 paper 11 is of historical interest for being the second econometric model constructed of the Australian economy. In his work, through both constructive contributions and methodological critique, he has always sought to highlight and advance the evidently close connection between economics and econometrics.Kmenta was born on January 3, 1928, in Prague, the Czech Republic. He was educated at the Jirasek State Gymnasium in Prague (1939 47) and the Czech University of Technology in Prague (1947 49). At the University of Sydney (1952 55), Australia, he graduated with a Bachelor of Economics degree (First Class Honors). He obtained a Master of Arts degree (1959) and a Doctor of Philosophy degree (1964) from Stanford University with a doctoral dissertation entitled Australian Postwar Immigration: An Econometric Study. After teaching stints in Australia, Stanford, and Wisconsin, he taught at Michigan State from 1965 to 1973 and at the University of Michigan from 1973 to 1993. He is currently Professor Emeritus of Economics and Statistics, University of Michigan, and Visiting Professor, CERGE-EI, Charles University, Prague.His various academic awards and prizes include the Alexander von Humboldt Foundation Award for Senior U.S. Scientists, the Michigan Economic Society Best Professor Award, the Royal Economic Society Lecturer at the University of Leicester, and the Karel Englis Medal of the Academy of Sciences of the Czech Republic. He was awarded an honorary doctorate from the University of Saarland, Germany, and served as associate editor, Journal of the American Statistical Association (1973 1979 and 1985 1992), associate editor, Review of Economics and Statistics (1975 1992), and associate editor, Metrika (1981 1985). Kmenta was listed as 40th among all economists ranked by the total number of citations (Medoff 1989).This is an edited transcript of two tape-recorded interviews conducted with Professor Kmenta in Sydney on March 12, 2004, as he visited the University of New South Wales to present the seminar Econometrics: A Failed Science? I am indebted to one of Kmenta s former students, Eric Sowey, for suggesting this project and for his enthusiasm and support throughout.

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THE ET INTERVIEW:

PROFESSOR JAN KMENTA

Interviewed by John Lodewijks

Jan Kmenta is the author of the internationally respected text The Elements of

Econometrics @1 # and co-editor of several books related to econometric model

building+ His published research over 40 years relates to many facets of econo-

metric theory and practice,including the estimation of production functions,

Professor Jan Kmenta+

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log no+ECT05034

Econometric Theory,21,2005,621–645+Printed in the United States of America +

DOI:10+ 10170S0266466605050346

the evaluation of structural econometric models,and estimation in the face of

missing data+This work has appeared in the leading journals of the profes-

sion+ A 1966 paper @11# is of historical interest for being the second economet-

ric model constructed of the Australian economy +In his work,through both

constructive contributions and methodological critique,he has always sought

to highlight and advance the evidently close connection between economics

and econometrics+

Kmenta was born on January 3, 1928, in Prague,the Czech Republic+ He

was educated at the Jirasek State Gymnasium in Prague ~1939–47 ! and the

Czech University of Technology in Prague ~ 1947–49!+ At the University of

Sydney ~ 1952–55!, Australia, he graduated with a Bachelor of Economics degree

~First Class Honors!+ He obtained a Master of Arts degree ~ 1959 !and a Doc-

tor of Philosophy degree ~ 1964! from Stanford University with a doctoral dis-

sertation entitled " Australian Postwar Immigration:An Econometric Study +"

After teaching stints in Australia, Stanford, and Wisconsin, he taught at Mich-

igan State from 1965 to 1973 and at the University of Michigan from 1973 to

1993+ He is currently Professor Emeritus of Economics and Statistics, Univer-

sity of Michigan, and Visiting Professor, CERGE-EI, Charles University ,

Prague+

His various academic awards and prizes include the Alexander von Hum-

boldt Foundation Award for Senior U+S+ Scientists, the Michigan Economic

Society Best Professor Award, the Royal Economic Society Lecturer at the

University of Leicester,and the Karel Englis Medal of the Academy of Sci-

ences of the Czech Republic+He was awarded an honorary doctorate from the

University of Saarland, Germany, and served as associate editor ,Journal of

the American Statistical Association ~1973– 1979 and 1985– 1992!, associate

editor, Review of Economics and Statistics ~ 1975–1992!, and associate editor,

Metrika ~ 1981–1985!+ Kmenta was listed as 40th among all economists ranked

by the total number of citations ~Medoff 1989!+

This is an edited transcript of two tape-recorded interviews conducted with

Professor Kmenta in Sydney on March 12, 2004, as he visited the University

of New South Wales to present the seminar Econometrics:A Failed Science? I

am indebted to one of Kmenta's former students,Eric Sowey ,for suggesting

this project and for his enthusiasm and support throughout+

A CZECH REFUGEE IN THE ANTIPODES

Professor Kmenta, you were born in Prague in 1928; could you tell us

about your upbringing and early education? Your education was obvi-

ously interrupted by the war.

I was born in what you may call a middle-class family+My father was a mailman0

postman+ My parents were very high on education,so they insisted that I go to

a selective high school+In Europe,they call them gymnasiums+So I went to a

gymnasium in 1939 and graduated in 1947+Then I went to the University of

Technology of Prague to study statistics+I was actually in a predicament as to

what to study because my favorite subjects in high school were Latin and math-

ematics, and it was impossible in Prague to combine the two+You either had to

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do one or the other+So I was looking for something else,and I was told that

insurance mathematics and statistics might be an interesting field to get into+So

I registered at the University of Technology,and I was taking courses in statis-

tics+ After two years there,I got involved in a " students' resistance movement";

this was under communism,of course,and we were soon found out by the police

and a friend of mine was arrested,so I left the country as a political refugee+ I

was in a refugee camp in Germany for a couple of years,and then I came here

as one of the New Australians+There was a big wave of immigration at that time

from the refugee consulates— Latvians,Poles,Czechs, and Hungarians,from the

East European countries+Transport to Australia was financed by international

refugees' organizations that were running the camps+

In fact,I really didn't want to go to Australia+I wanted to go to the United

States, but the U+S+quota was small for Czechs,and I would have had to wait

about five years in Germany to get to the States+The only two countries that

were open to us were Australia and Venezuela+I wanted to learn English,so I

chose Australia, and I came here+When we got here,at the time,all immi-

grants coming from refugee camps had to work as laborers under two-year con-

tract+ That meant the Employment Office sent you wherever there was a shortage

of labor in Australia+So I was sent to a stone quary near Picton,about 30–40

miles from Sydney+I was there for a while and then managed to wangle my

way back to Sydney+There I was working first in a factory and later in a TB

hospital in Randwick ~on the site of the Prince of Wales Hospital!as an orderly,

for the rest of the contract+

The University of Sydney had parallel courses in the evening for ex-

servicemen, so it was possible to work during the day and take courses in the

evening, which is what I did from 1952 to 1955+That saved me basically; other-

wise it was impossible to study because I had to work to feed myself and pay

the rent,so I could not attend the day courses+I wanted to do statistics,but

there was no statistics department at the University of Sydney+There were two

ways of studying statistics:one was through the mathematics department;the

other one was through the economics department+In the mathematics depart-

ment, I would have to take physics,which I disliked+In the economics depart-

ment, I would have to take economics,about which I knew absolutely nothing+

So, I decided I'd try that,and I enrolled as a Pass student at the beginning,but

the professor of statistics,Stuart Rutherford,called me and said that I should

switch to Honors in the following session,which I did+I am very grateful to

him, because otherwise I would have had trouble getting into academia later+

Academia was like a trade union cartel,and you needed an Honors degree to

advance+ So I registered for the Honors degree course,which was a four-year

course, and then I obtained a teaching fellowship at the University ~ 1955–1956!+

My Honors thesis consisted of a collection of mistakes in Gerhard Tintner' s

book Econometrics ~ Wiley ,1952! ,so that was not really a high pressure effort +

Anything about econometrics would have been an innovation at that time because

it was such a new subject,so that was very easy+The final examination was,of

course, harder but it—along with the thesis—earned me graduation with First

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Class Honors+I was not working half as hard then as I was later when doing

the doctorate at Stanford+

Was there such a thing as econometrics at the University of Sydney at

that time?

No, this was just the beginning of econometrics+There was only statistics at

the University of Sydney in the economics department,but Rutherford was inter-

ested in this new subject of econometrics+The first textbook, Gerhard Tintner's

Econometrics, given to me by Rutherford got me interested in the subject because

it was obviously what economics needed+

After your Honors degree you took a lecturer's position at the Univer-

sity of New South Wales. What was UNSW like at that time?

I helped set up the first economics department there in 1956+The founding

father was David Rowan,who came from the University of Melbourne basi-

cally for the purpose of establishing the economics department+He was of course

involved a lot in administration because he had to build up the whole structure+

He brought four youngsters into the department,the first of whom was Neil

Runcie, a leftover from the NSW University of Technology,which was the pre-

vious name of UNSW +Then came John Pitchford ,who had just graduated from

ANU in macroeconomics,and a First Class Honors graduate from Sydney from

my year,a classmate of mine,Ted Kolsen,doing micro,and myself+So there

were four of us basically holding the whole economics department together at

that point+

There were large enrollments—large classes to teach+It was basically the

right thing for the university to start the economics program because not every-

body could get into Sydney University and,in addition,there was an implied

expectation that UNSW would be more,should we say ,technically or business

oriented, so that brought in quite a number of students+Thus it was quite a

large department at that time+

I was at UNSW for two years before going to America and then for one year

~1959 – 1960 ! after I got back+I had to come back to Australia under the return

requirements of the Fulbright scholarship+And in the meantime I married Joan,

who was a student at Stanford,so she came here with me+When I got back I

had a single project in mind,which was to finish the dissertation for the doc-

torate from Stanford+I then moved to the University of Sydney ~ 1960 –1962!

because Rutherford wanted me to go there and it was easier than establishing a

new economics program at UNSW +

And then, in 1962, we lost you to America permanently. In hindsight,

would there have been an offer that would have kept you in Australia?

After all, you had several Econometrica articles forthcoming.

No+ At that time,it was both the pull of my wife and also the pull of the

opportunities— Ken Arrow, my dissertation supervisor at Stanford,had arranged

two nice job possibilities for me,one at the University of Minnesota and the

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other at the University of Wisconsin+Also I was basically the only one teach-

ing econometrics as such in Australia at the time+I remember that K+O+Camp-

bell was the big professor in agricultural economics and he had these two bright

students sitting in the front of my econometrics class at the University of Syd-

ney, one of whom was Alan Powell+This would be in the year 1962+There

were considerably more excitement in the American scene+There was also all

these é migré s who came to America that livened up the place+They were young

people then and made quite a splash in the profession+Compared to that,those

four young people that David Rowan hired at UNSW were the only crop that

he could get+There was not very much going on there at that time+ There is no

question that the action was in America+Now it does not really matter that

much+ The only disadvantage of you being here instead of being anywhere else

is that it takes a little longer to get to America or to Europe+So today it does

not really make such a difference+But at that time,it did make a difference

where the action was+

A GRADUATE STUDENT AT STANFORD

At the time, Australian professors were steering all their best students

to Cambridge or Oxford. Very few of them went to America. So why did

you buck the trend and head to the United States?

In those days,the big names in Australian economics, Arndt,Butlin,Cameron,

and Corden,formed a clique that held economics in their hands,and they all

came from Oxford or Cambridge, and so they made sure they were steering

their students there+Yet it was fairly clear that Oxford and Cambridge were not

at the forefront of econometrics+In fact,they were lagging behind+The main

people advancing econometrics in the UK were Richard Stone at Cambridge

and Denis Sargan at LSE+But econometrics was dominated by the Dutch

basically— Tinbergen and Theil+ The Americans, when they see something new ,

they go full force,full steam into it,and this is what was exciting about going

to America+

I don't think I would have been happy at Oxford or Cambridge because of

the system+What I really liked was the fact that after I did the First Class Hon-

ors I went to graduate school in the United States and basically started two

years of coursework where the understanding was that you would be wrestling

with the latest developments in theory and applications+During those two years

we were discussing the latest articles,the crest of the wave for the advance of

the subject,and that appealed to me very much because I knew I was very far

from being a very well educated economist+

In our undergraduate education,even at Honors level,we did not have a very

good conception of economics at the frontier+We were ~ hopefully!learning

basic micro,basic macro as undergraduates,but when I came to America,we

had basically advanced micro and macro,mathematics and econometrics the

first year,and you only specialized later +At the undergraduate level we did not

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know the latest journal articles+We had textbooks and things like that,but it

was not a graduate type of education where you already take for granted that

everybody has done basic micro,basic macro and you take it from there+

So I spent two years at Stanford on a Fulbright scholarship+The Fulbright

scholarship at that time was very hard to get because there was only one for

each state of Australia in all disciplines+I got it mainly because of the fact that

I was interested in econometrics,which was not taught in Australia,so it was a

good thing to send someone from Australia to the States+This was in 1957,and

I was at Stanford until 1959+

Was it a shock to go into that program after you were at Sydney Uni-

versity? Who were some of your fellow students at Stanford?

It was a pleasant shock+We were a bunch of bright students,and there was a

very informal relationship between professors and students in America+One of

my fellow students was Karl Shell,who is editor of the Journal of Economic

Theory+ In my year,there was also Belton Fleisher ,who is a labor economist at

Ohio State University,and we still see each other fairly often+There was also

Menahem Yaari, who is in Tel Aviv and is very well established in economic

theory+ There were about ten of us+

What was the academic environment like at Stanford?

My supervisor was Kenneth Arrow +He was very good,but his interest was not

directly in econometrics+It was not his area of research,so I did a fair bit of

research with Arthur Goldberger,who was also teaching at that time+ As Arrow' s

research assistant I was asked to plot the data on wages and unemployment+

Basically, the Phillips curve,which was pretty much in the air at the time and

Arrow was fishing for it+That was a very exciting time+The other thing that I

enjoyed was that it was a very competitive environment+We had seminars,we

had to make presentations in courses,and we were always waiting for some-

body to make a mistake to jump on him+It was not quite as vicious as Chicago,

but there was competition and it was a game,and everybody played by the

same rules+We were all extremely hard working+On Sunday night,after hav-

ing a date with my future wife,I would bring her back to the dormitory at

10: 30 and then go to the library and meet virtually every one of my classmates

there, working until the closing time at two o' clock+ So it was day after day+

We were just working like crazy all the time because there was pressure:you

had to pass courses,you had to prepare for presentations and for all the semi-

nars+ It was a very hard working time of my life,probably the hardest time+

There was only a limited time when you could do things without falling behind

in your courses+

Why did you choose a dissertation topic on migration? Was it because

of your own experiences?

Yes , I was interested in migration+I really did not know much about it+There

were two questions:the effect of migration on Australia,that was probably the

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major point of my interest,but there was also the other aspect of it,how the

environment worked on the migrants,the adjustment process that was taking

place+ The main chapter was the macroeconomic impact,and it was basically

an adaptation of J +W + Nevile' s 1962 model,which was the first econometric

model of the Australian economy +It was adapted to allow for the effects of

immigration+ I found out that there were only two macro areas that immigra-

tion had an effect on:demands for imports and consumption+I found that the

import coefficient was very high+Every immigrant was supposed to increase

the amount of imports by 1,900 pounds,which was a lot of money+Arrow didn't

believe it+Then I figured out that actually what happened was that in the imports

were also counted the possessions of the migrants+So that jumped it up,that

satisfied Arrow+

THE EMERGENCE OF ECONOMETRICS

How did your dissertation model with its 15 structural equations and

identities mesh with other models at the time?

The first American model was Klein' s model at the University of Michigan+

That started in 1952+That model was about 50 equations and a number of iden-

tities+ That model still exists+By now it is about 100 equations and a number of

identities, and in principle it is still a simultaneous equations model+That was

the first one,and then there were follow-ups+But Klein was the father of Amer-

ican macroeconometrics,and he got a Nobel Prize for it+

What was econometrics like then?

What we mean now by econometrics is basically the study of regression mod-

els and other complicated models for estimation and forecasting purposes+In

those days,the Tintner textbook in econometrics was basically a " hunting trip+"

It was searching for statistical topics that might be relevant to the study of eco-

nomics such as discriminant analysis,as used in anthropology+His own hobby-

horse was the variate difference method,which did not catch on,but he thought

it might+Tintner was continually looking for something that might be applica-

ble to economics+He knew what the economic modelers were doing and wanted

to take it a step further,so there was the matter of how to use statistics to

estimate and possibly test economic models+This was before the simultaneous

equations time;there was nothing about that in the book+There was ordinary

least squares estimation of course+

After that there were textbooks in econometrics that were basically—almost

entirely— oriented toward simultaneous equations, modeling and estimation+This

was really not fulfilling because you had to start from scratch,you start from

the simplest possible model,and you could not jump immediately into more

complicated models+So at that time,econometrics was in a very premature

state+

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The first real econometrics textbook of the kind that we know would be Jack

Johnston' s book, Econometric Methods, that came out in 1963+Johnston had

taught the subject matter of the book at the University of Manchester in the

late 1950s,and then he went as a visiting professor to the University of Wis-

consin and gave that course there+I learned my econometrics from Arthur Gold-

berger, who had learned it in Holland from Theil+I think Goldberger's course

was probably the first proper course in econometrics ever taught,even before

Johnston+ It was basic econometrics+This was the basis for Goldberger's text-

book Econometric Theory, which came out in 1964+At that time Johnston was

at Wisconsin, teaching a very similar course+In fact,when I came back from

the States after absorbing Goldberger's teachings,Rutherford gave me a page

proof copy of Johnston's book,and I said," This is Goldberger 's course;this is

what I had at Stanford+" I don't know if Goldberger had some kind of contact

with Johnston or not,but it certainly was pretty much the same story:they both

figured out that you start with a regression model,follow with then dropping

assumptions, and make generalizations+It was really a very exciting time+These

were the real beginnings of econometrics+Goldberger got his degree at the Uni-

versity of Michigan,where Lawrence Klein was at that time+They worked

together there,and then they both went to Holland+

What about all this work by Frisch and Tinbergen over in Europe?

That' s a very interesting story +The initial work was Tinbergen' s 1939 Statisti-

cal Testing of Business-Cycle Theories, in two volumes for the League of

Nations+ There was his Dutch model ~ 1936! before that—but volume 2 con-

tained his American model+But the Klein model was more educational rather

than forecasting because it finished in 1939+Then we had the structural break

of war, so Klein' s model was going into the postwar period,allowing for the

structure of breaks in the meantime+

Klein also had his 1950 book Economic Fluctuations in the United States,

1921–1941, in which he has three models+Model I,with about 8 or 9 equa-

tions, is the one people have since used repeatedly in order to illustrate new

techniques of simultaneous equations modeling+Model II is purely a reduced

form model,so it is a single equations basic type of model,which the Federal

Bank of St+Louis uses as the foundation of its more elaborate model today+

Model III was very nice+About 20 equations,very closely tied to economic

theory, and I really thought it was a lovely model,and I was very surprised to

find out that Klein basically let it go and thereafter produced,with Goldberger,

another model ~Klein and Goldberger, 1955!, which was quite different from

the one that he had in his Economic Fluctuations book+ The Klein 0 Goldberger

model frankly is not at all as elegant as Klein's model III+There is a separation

between the real sector and the monetary sector ~see Cornwall, 1959!, not at all

a nice model+So I was very surprised that Klein would do that while he had

this very nice model+

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The reason for this I discovered by chance by having a student of mine writ-

ing a dissertation on Klein' s model III+ I was interested in finding out the prop-

erties of that model,putting it through a dynamic simulation,and then it dawned

on me why Klein did not like it—it was an explosive model+It was not a stable

model+ In those days,we did not deal with unit roots;nobody believed that

anything was explosive+I suspect that Klein figured out,as my student did,

that the model was explosive+ These are fascinating stories+ I figured it out just

by chance,because this student of mine,who is now at the University of Cin-

cinnati, did this for his dissertation and it was an eye-opening thing for me

because by this time we knew more about dynamics than at the time when

Klein wrote that book+

What are your memories of the early days when you started off as a

member of the Econometric Society and later as associate editor of JASA

and the Review of Economics and Statistics? The numbers of econometri-

cians was obviously much smaller then. Was there a feeling of camara-

derie among these giants of econometrics whom you moved among?

Yes , definitely there was in the early days when econometrics was basically in

its birth+ It developed with the Cobb –Douglas production function and the macro-

econometric modeling of Tinbergen+The camaraderie was clearly displayed in

the enthusiastic and confident way in which econometricians behaved in those

days: we were the saviors,we were really going to advance economics through

exposing economic theories to empirical observations by the use of rigorous

statistical methods+

Who were the ringleaders? What role did the Cowles Commission play?

It itself had a lot of opponents and eventually moved out of the Univer-

sity of Chicago and ended up in Yale in 1955.

The founders of modern econometrics were really the Cowles Commission

people+ Among them you find names like Haavelmo and Koopmans ~Nobel

Prize winner in 1975!and some well-known statisticians'names like Girshick

and Wald+ Over time the Cowles Commission changed its orientation+The orig-

inal orientation was definitely concentrated on econometrics+The original inten-

tion was to forecast stock market prices,and in fact you can find an article by

Cowles where he writes about stock markets and stock market prices+The

econometric influence was entirely in the simultaneous equations area+By this

time in the early 1950s there was an emergence of popularizers like Klein,

Theil,Stone, and Sargan who were taking over the discipline+There was no

longer a need for this collaboration of statisticians, mathematicians, and econ-

omists because the popularization of econometrics made it accessible to econ-

omists+ Mathematics and statistics for economists were being taught in courses,

so the original function of the Cowles Commission was taken over by econo-

metricians at large+

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By the time the Cowles Commission moved to Chicago the main focus of

research was away from econometrics and concerned with things such as infor-

mation theory that Marschak was pushing+While it was in Yale,some econo-

metric content returned to it because of Peter Phillips's influence on the

profession+ He and other people were particularly intent on bringing unit roots

to the attention of econometricians+

I do not think that Friedman would have been an opponent of the simulta-

neous equations approach used by Cowles at Chicago+His main thesis was a

monetary thesis,that money made the difference in economics,but you can

incorporate a monetary thesis into econometric models without great trouble,

so I don't think that was his opposition+He definitely was involved in econo-

metrics when it came to the permanent income hypothesis,so it's not that he

would be opposed to econometrics+In fact,the econometric aspect of his involve-

ment was the disparity between cross-section results and time-series results in

estimating the marginal propensity to consume+So Friedman came up with his

hypothesis about permanent income being the primary causal influence on

consumption+

My guess is that Friedman might not necessarily have been influential in the

move of the Cowles Commission from Chicago to Yale+It is more likely that

the Cowles Commission started being less interested in econometrics+It prob-

ably also had to do with the financing because the Cowles Commission was

drawing a lot of grant money+When this interest was taken over by universities

involved in the original orientation of the Cowles Commission,some of these

funding sources were no longer available+

Was it difficult for econometricians to get into the major economics

journals in the early 1960s? Was there a bias against mathematical or

quantitative research?

I would say the opposite+Econometric articles were more valued,especially

applied econometric articles+Theoretical economics was harder to get in because

it was getting more and more complicated,and there were many more people

who had the basic education to advance econometrics+When I came,I had my

undergraduate degree in statistics and economics,and I had studied statistics

for two years in Prague,so I was a big exception in the economics profession+

Economics was mainly verbal,and economists did not have much mathemat-

ics, so at that time for me it was not all that difficult to make a little bit of an

impact on the profession+But as people acquired more and more mathematics

and statistics, this resource was much less scarce, so in that sense it was more

difficult to get publications in+But other than that I think the scientific revolu-

tion, starting with Samuelson' s Foundations, had caught on and we still are in

it+ It is just a question of how we go about it and what type of science we

choose— but we still have the scientific revolution+

There are people of the old days who disliked the fact that Samuelson or

anybody else was putting economics in mathematical terms because they were

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saying," This is not what I meant+" But then they were not capable of express-

ing what they really meant in rigorous ways+If you could not clearly and

rigorously express yourself then nobody quite knew what you meant+The math-

ematical expression reduced the ambiguities+Now I think there is still room

for innovations in terms of nonmathematical contributions,and the new insti-

tutional economics is a very fertile example of the fact that there is still room

for new ideas+ These new ideas are basically not mathematical ideas,but they

make inroads into the subject+So there is room for both+Fresh ideas are always

good, and having more rigor introduced into the expression of fresh ideas is

also valuable+

What bothers me is the gap between the theories and applied work+This gap

is between econometric theorists and econometric applications and between eco-

nomic theorists and economic applications+There appears to be an isolation of

economic theorists from applied work+As a result,the stochastic specification

of models is very casual,especially when it comes to the disturbance term+ Yet

a careful consideration of the nature of the stochastic disturbance is crucial+

There are few instances of well-specified observational tests of a theory+The

fact is that once you go from economics to economic applications,you have to

strike econometrics;there is no other way of going to applications+And that

basically calls for a merger of the two+A separate department of econometrics

is not very healthy for the profession+It must be meshed with economics+

Did you have anything to do with the Brookings–SSRC Model Project

(1961– 1967)? It seems everybody in econometrics or economic theory

had some part of that model: Klein, Duesenberry, Kuh, Fromm, Orcutt ,

Theil, Almon, Eckstein, Eisner, Fox, Fisher, Evans, Dhrymes . . .

The rise of large-scale macroeconometric models like the Brookings model,

the Wharton model, the Data Resources Inc+ model, and so on,dominated the

1960s+ My part was actually negative because at that time I was associated

with Karl Brunner,who was a big critic of these huge macroeconometric mod-

els, mainly because he thought that they were getting away from economic

theory+ These were criticisms of a methodological kind+Some of the criticism

came from Robert Basmann,who thought macroeconometric models were unsci-

entific because they were using ranked variables,and of course you can do

anything with ranked variables,so there was some truth to that+There was also

the question of pretest bias involved too:you keep on playing with the equa-

tions until you get what you wanted to hear in the first place+So there were all

sorts of criticisms raised against this industry of macroeconometrics+Brunner

got support from Rochester,because the dean there was also concerned about

this, and began organizing conferences that were basically meant to be cri-

tiques of the Brookings model+I co-edited two books in 1980 and 1981 with

James Ramsey dealing with these issues+ But practically everybody was involved

with this research—there were big grants;there was a lot of money involved+

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You' ve been involved with journals for a long time. When you look at

journals like the Review of Economics and Statistics or Econometrica,

which are some of the highest ranked journals in the profession, what

are the main changes that you've seen over the time that you were

involved with these journals?

With respect to the Review of Economics and Statistics a lot probably depended

upon the editor+ The Review of Economics and Statistics was for a long time

edited by Houthakker,who was at Harvard,and he did an extremely good job+

He took personal interest in the contributors,and if you sent him a little note

about something he would come back with " Yes , this is interesting; can you

make a theorem out of it?"or something like that+ What has changed a lot in

Econometrica is that it has become very technical+In the early days,you took

Econometrica and basically read it from cover to cover,with minor exceptions

of some specialized things+It is impossible to do that now because the articles

are so difficult to read, so " congested," you might say +Some of them are very

difficult mathematically +I made my personal rule that when I see an article in

which the author uses max+and min+then I read it+If he or she uses sup+and

inf+ then I don't+There is a lot of mathematical pretension going on in the pro-

fession, and I am not really happy with that+

I guess a cynic might say that elder statesmen, feeling liberated from

conventional academic constraints on speaking their minds, often lambaste

the very profession that they were instrumental in establishing and nur-

turing for going in new directions. You have various examples of people

like Leontief giving presidential addresses criticizing the profession. But

this is in their older age. You probably in your youth were just as critical

of those " old-timers" objecting to the way the profession was heading.

There is constructive criticism that aims to improve the situation+There is also

destructive criticism+For example,distributed lags are dead now+ Time-series

researchers have suppressed them completely because they have much more

sophisticated models dealing with this sort of thing+This is a matter of fashion+

Should we criticize this fact? I happen to have liked distributed lags,but some-

one else might have criticized that,and they would have been proven right by

the market test+ However, academic markets do not always work optimally +

Look at rational expectations modeling+People of my generation would say

that this has been overdone+ There is something good in this,but my criticism

would be that it has been carried too far+By now ,the basics of it are taken for

granted, and it is not mentioned much+There was a promise that simultaneous

equations models would be adapted to rational expectations modeling+Nothing

of that materialized+There were attempts to develop new numerical methods of

building rational expectations into simultaneous equations models+Nobody ever

hears about it now+

Obviously parents criticize their children and children criticize their parents,

so there are generational problems wherever you go+And in some respects,

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parents are right,and in some respects they are not necessarily right,and I

think that's true in our profession also+

If you were to look at reforming the profession, particularly in econo-

metrics, you would still teach things like Granger causality and vector

autoregressions (VARs), but you would stress the qualifications; is that

the approach that you would suggest?

Yes , absolutely+ Granger causality;the name says it all+It is not a test of cau-

sality, or you would not be calling it "Granger causality +" There are limitations

to it,of course,there are obviously things to be said about it+I have nothing

against using it,but it should not be used in a blind way,a mechanistic way +

One should pay attention to the fact that it basically only tests things that hap-

pen in the future that could not have been predicted by happenings in the past+

It' s fine,but it' s not causality,and nobody ,no philosopher,could call it a true

causality test+Granger would not call it that+

The problem with VARs is their lack of structure,of course+You can have

VARs, and provided you talk about them as reduced form equations where some

of the knowledge has been ignored and some of the knowledge need not have

been ignored and could have been drawn on,then it's perfectly OK as far as it

is concerned+So there is some value in doing that+

You asked me what I would like to see changed+ Undoubtedly, the develop-

ment which should have been prevented was the takeover of macroeconomet-

rics by the atheoretical time-series people+Both economists and econometricians

should have got together and started worrying about dynamic relationships+The

movement from one equilibrium to another needed clarification+There were

some tentative articles in the 1970s where you had adjustment cost models or

partial adjustment models that were fairly primitive because the parameters just

sit there and remain constant+The parameters needed some economic interpre-

tation, and in fact the parameter itself is a function of the cost of adjustment+

Nobody has quite developed that far enough so that you would model and test

the theories about how you move from one equilibrium onto another+I was

hoping at one point that we were making progress—there were some articles

by Roger Craine and a few others that I liked—but it sort of died;nobody hears

about it any more+Maybe it is too difficult+

Today other things are easier to do for people with different tolerances+But

if that had been worked out,you would not have this mechanistic time-series

modeling taking over macroeconometrics+We would have proper modeling based

on theoretical considerations+So that is I think the major failing,and I am sorry

that I myself have not been talented enough to make contributions in that regard+

But I was hoping that there would be talented people who would make that

contribution+ I am very unhappy about this time-series and cointegration crowd

overtaking macroeconometrics+It upsets me because it is a waste of economic

knowledge that we have not incorporated in this+So that would be my biggest

regret in terms of the development of the discipline+

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Other than that,of course,the excitement of the early days you cannot really

beat+ All of a sudden you could take economic relations and put them in math-

ematical form and then go and test them+It was great that you could do those

things, that you could refine the ways of doing the testing,that you could drop

some of the assumptions that are involved in the testing,and so on,and at the

end come up with a better way of doing it+

Paul Samuelson had that excitement. He had the excitement of put-

ting it in mathematics, but he did not take the next step.

Yes , he did have that excitement,and he did not take the next step, exactly+

W +C + Mitchell made that statement in 1950 + He was saying that the theorists

did get this mathematical reformulation,but we did not get the next step of

tidying it up and marrying it with statistics+

In Australia, you had separate departments of econometrics, separate

from the departments of economics; that's not the American way is it?

No, not at all+In fact,this is the European way of separate fiefdoms+ You d o

not only have econometrics and economics departments,you have separate

departments of economic theory,labor economics,and so on+I am very much

fighting against that+I am very much fighting against the separation of econom-

ics and econometrics+I really believe that an economist should be an econo-

metrician and an econometrician should be an economist+

AN ECONOMETRICIAN IN AMERICA

Let us go back to your early career moves. You returned to Stanford in

1962 as an acting assistant professor, and then Arrow arranged for you

to get job offers at Minnesota and Wisconsin. You took a position at

Wisconsin from 1963 to 1965. Can you tell us about your experiences

there?

Wisconsin was attractive to me because Goldberger was there as a professor of

econometrics and I had been his student at Stanford before+I preferred a one-

year appointment,that gave me a full year for research,to a stable six-year

appointment at Minnesota as a tenure-track assistant professor+ I was working

with Guy Orcutt at Wisconsin on the microsimulation model that he was push-

ing at that time+He brought in a lot of good people,and a lot of publications

came out of it in good journals+Orcutt kept on getting money for his project

but never managed to complete it+We got the consumption sector,we got part

of the investment sector aggregated,but the public sector never got off the

ground+ But Zellner's papers on seemingly unrelated regressions ~ Zellner,1962;

Zellner and Huang, 1962;Zellner,1963! and some other important papers got

written+ Orcutt got very disappointed,as the project did not come to the ful-

fillment of his aims and wishes,so then he moved to the Urban Institute in

Washington for a while before finishing at Yale+There was criticism from macro-

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economists who did not like this microsimulation that Orcutt was pushing,but

it was a very fertile environment for doing research+

When I was at Wisconsin the academic market was just so rich;there was a

great shortage of econometricians at that time+I had calls from all over the

place to go to other universities+At the end I finished up at Michigan State,

partly because they gave me a huge salary increase from what I had before,but

mainly because they wanted me to build up econometrics there+I was able to

get all sorts of money,numerous possibilities for running workshops,inviting

visitors, so I did that+I was pretty happy at Michigan State while I was doing

that+

You were at Michigan State from 1965 to 1973. Was it a supportive

environment for econometrics? How did the older professors react to

what you were doing?

I was the econometrician,and there were a couple of young assistant profes-

sors from Chicago,Tom Saving and Boris Pesek+These people were prolific in

publishing and heavily into research+But there was also an entrenched old-

timer group,and there were some frictions,but the friction was not mainly

between us and the old-timers but between the chairman and the old-timers+It

was the chairman who brought us in and was pushing our side+And the old-

timers did not like it+ Eventually, the chairman was disgusted and he left,and

most of the rest of us left too+The department at that time pretty much disin-

tegrated+ But now it has been built up again,and it is very good and very strong

in econometrics again+In fact,it was my student from there,Peter Schmidt,

who is running it now+They have Dick Baillie from England,who is also there;

Jeff Wooldridge, who has just had a couple of books out+They are excellent,

much better in econometrics there than in Michigan now+

Tell us about the birth of the Elements of Econometrics (1971).

This was really my course in econometrics at Wisconsin+I was very much

absorbed by Goldberger's ethos of simplification+The book proved popular

because I had very simple explanations for maximum likelihood estimations

and things like that+Students liked it a lot,and then the book people who went

out and hunted for potential texts approached me+Macmillan book distributors

asked me whether I would be interested in writing a text+So I said yes and

wrote it and finished it while I was at Michigan State+

How long did it take from once you started writing the book? You

were very active writing articles as well in all sorts of theoretical and

applied areas in econometrics. So was writing the text worth it?

The book came out in 1971,and I started it in 1965– 66— so it took 5 years —

and was intended for undergraduates and first-year graduates+It is now in sec-

ond edition and on its ending streak,but on the whole it sold over 60,000 copies,

so that's quite a number of readers+I got a lot of citations from it because it

was an easy reference for people who were doing research+It was certainly

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worth it+ I got so much mileage out of it, and it has been translated into other

languages+ In January 2004 I was at a conference in New Delhi and had a del-

egation of students coming to see me because their professors had used the

book+ The year before,I was at a conference in Rio de Janeiro,and since the

book happened to be translated into Portuguese,I had people coming to see me

there+

The second edition came out in 1986 and incorporated all the new things at

that time+But this was before the time-series revolution,Peter Phillips's unit

roots, and all that sort of thing+

What has been your reaction to these recent developments?

I am somewhat critical of them+ I have just finished writing a little article about

the 2003 Nobel Prize in economics that questions this research effort+Basi-

cally, what I criticize there is the movement of econometrics away from eco-

nomics because the people involved with the atheoretical time-series movement

tend to be much more mechanistic in their modeling,much less grounded in

economics, compared to those who do behavioral simultaneous equations mod-

eling+~ The VAR modelers are atheoretical but still use simultaneous equa-

tions+! So I criticize this quite a bit because it is an irony,seeing that the first

Nobel Prize in econometrics went to Tinbergen and Frisch,who were the found-

ing fathers of Econometrica and the Econometric Society+The first issue of

Econometrica came out in 1932,and the aim of the Econometric Society was

clearly stated to be a "Society for the Advancement of Economics in Relation

to Mathematics and Statistics+" It is very clear that econometrics was to be the

servant of economics+Improving economics is what we should be aiming at+

We should be concerned about advancing economics,and econometrics was a

tool toward that+The time-series revolution is a movement away from that trend

because it does not necessarily advance economics+It provides a way of seeing

if series are moving or not moving together, but it does not pay attention to

why they should be moving together+It talks about fluctuations and trends+And

the trend behavior is shown as a function only of time! Economists have all

that education in economic analysis,and all they can say about the trend in

gross domestic product ~ GDP! is that it is a function of time? That is very sad+

In fact it is incredible that anybody can take it seriously+So I am very strongly

against it+The good side of this movement is that it draws attention to the dynam-

ics, and that is of course what economics was neglecting before,but in terms of

advancing economic knowledge, I don' t think there is anything of that in there+

Similarly with Sims at Minnesota with his VAR models+He is a great attacker

of behavioral simultaneous equations modeling+In fact in 1980 in "Macroeco-

nomics and Reality"he said that macroeconometric models have not only been

criticized, they have been discredited;a strong statement! Lucas has been a

little more guarded because he had that theory of adjusting parameters,Sims

did not have that+Sims was basing his criticism on the forecasting perfor-

mances of macroeconometric models and the fact that he did not like some of

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the assumptions that were being made by macroeconometric modelers+So he

came up with this VAR,and it survived+But the people who are really into

economics, who take economics seriously,are basically using the VAR in the

sense of reduced form equations,but they worry about not letting the coeffi-

cients be entirely free,as they are in the original VAR models+They impose

some structure on those coefficients+A structure based on the structural equa-

tions on the assumptions that they contain+So there are some sensible modifi-

cations being undertaken+When I criticize VARs,some people that I know at

Michigan, who are working on this,immediately jump up and say that they are

trying to put some structure on the coefficients,that it is not just listing vari-

ables and then running their lags+So VAR modeling survives+

The other thing that survives from simultaneous equations is the instrumen-

tal variable method of estimation+Of course it is often a misnomer to claim to

be using instrumental variable estimation because the instrumental variables

should properly come from other equations of your model, though often they

don't+

Two-stage least squares is nothing but an instrumental variable estimator using,

as instruments,a certain linear combination of the exogenous variables in the

model+ But how do you find an instrument, in general? Basically it seems to be

done in an ad hoc way+ That' snot how it should be done+There should be a

theoretical basis+With simultaneous equations,that basis came from having equa-

tions, and you looked for the exogenous variable in the equations other than

the one you were seeking to estimate+There is also the issue of hanging onto a

particular method which by itself really does not have much justification+

So you left Michigan State for the University of Michigan in 1973 and

stayed until your retirement in 1993. What was there at Michigan that

attracted you?

It was a move that I was not sorry for+With the mass exodus from Michigan

State of the younger people,and the so-called old school taking over,it was no

longer such an exciting place to be+The University of Michigan was higher in

the rankings than Michigan State,so it was a move up+I also had some friends

there— Shapiro and Hymans—who were already working on the Klein eco-

nomic models+It was a more cosmopolitan university—we had speakers com-

ing from all over the place+At Michigan State we had visiting speakers,but

you had to work to get them to come+At the University of Michigan,people

would come because they wanted to be at Michigan+At Michigan State,you

had to do something to attract them+

The department at Michigan had very high standards+The first year I got

there, which was in 1974,a decision was made about the future of seven assis-

tant professors+ It was taken very seriously+What was being discussed was not

the people themselves but the papers they had written+So we were discussing,

"Is this paper really that good? " and somebody would say, "It will probably be

published in the American Economic Review," and somebody would say, " Yes ,

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but in paragraph 3 on page 17 it says+++ "and things like that ,and so at the end

five of these people were fired+Some of them were pretty good, but it was the

idea that we only keep the best+It was not like that at Michigan State+It was

not as heartless,and there was more sympathy for the people concerned+But at

the end there was no problem for those assistant professors who were let go

from the University of Michigan to find jobs elsewhere+

Who were the key names, the key people at Michigan?

The biggest name was Gardner Ackley ,the macroeconomist and former presi-

dent of the American Economic Association+He was definitely the biggest name

there+ But there was a very strong international trade group ~Bob Stern,Alan

Deardorff ! and a strong labor group ~George Johnson and John Bound!+ The

econometrics group was also strong at that time+Public finance also+In fact the

whole department in every field was fairly well represented by people who

published in top journals+

A EUROPEAN AT HEART

We've talked mainly about the American scene, but you obviously have

very strong links with Europe. Would you regard yourself as a " Euro-

pean" at heart? What does that mean for you?

Yes , of course+During the communist era,until the end of 1989, only the West

was open to me in Europe+I got an Alexander von Humboldt Senior Scientist

Award to spend a year at the University of Bonn in 1979– 1980, mainly doing

research in econometrics+I also spent several summers at the University of Saar-

land in Saarbruecken and a sabbatical year in the Netherlands Institute for

Advanced Studies+So I had a close connection with Europe all the time+And

when the "velvet revolution"came to my native Czechoslovakia,I immedi-

ately went to Prague+My mother died only a short time after that+

A friend of mine from a later generation,a young Czech who was professor

at Pittsburgh,immediately managed to collect some money ,mainly from the

World Bank but also from other sources,to start an American-type graduate

program in Prague+This is called the Center for Economic Research and Grad-

uate Education ~ CERGE!, which was started in 1991+The program was at first

run by visiting professors+I went there in 1992– 1993, and I spent the whole

year teaching econometrics there+Since that time,I have been going there twice

a year for about a month each time to do some teaching but mainly to work

with students on their dissertations+I am on the Executive Committee there

also, so I have some influence over the development of the center that has been

very successful+

The purpose of this American program is to attract students from the former

Soviet bloc countries and educate the future economic elite in this region+By

now there are about 40 Ph+D+s who have come out of that program,and they

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are in influential government positions or are professors in an academic envi-

ronment+ It is still funded largely from the American foundations,but about

40% of the budget now comes from local sources+

In your contacts with European econometricians, is there a different

style to econometrics in Europe than there is in America? Is there a dif-

ferent approach?

There was a long period when there was really no difference+I went practically

every year to a European Econometric Society meeting,and the graduates there

who were presenting papers were just like the American graduate students+They

read the same books;there was really no difference+The only difference that

may have come up was the David Hendry' s " revolution+" Hendry has his own

ideas about what is wrong with econometrics and how to fix it+It caught on

very strongly in England,but it has not caught on at all in America+It is not

that Hendry's ideas were necessarily that revolutionary +Chris Gilbert from

Oxford keeps on calling it a revolution and contrasting the American Econom-

ics Review type of econometrics methods with Hendry's approach+I think the

distinction is overdrawn+Hendry has a laundry list of conditions that a model

has to satisfy before one can be happy with it+There is nothing particularly

wrong with that+The only thing that was new was the encompassing part,and

I don't consider this as so important,but there is something new there in going

from the general to the specific+There is a certain appeal,to me anyway,as

At the Center for Economic Research and Graduate Education ~ CERGE! in Prague+

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against going from the specific to the general because you have all this pretest

bias involved+You are often just testing the level of significance if you do the

general-to-specific properly,while if you are testing up,there is no way of doing

that+ So it seems a more scientific approach,but there is of course the disad-

vantage that you have to start this with a very general model+I don't really

have a good explanation as to why Hendry's approach has not caught on in

America+ But the fact of the matter is that it has not+

You seem to have a very recent interest in international development,

economies in transition, and new institutional economics. Do you want

to tell us a little bit about why you have broadened into those areas?

I happened to be a visiting professor at the University of Saarland at the time

when this was the focal point of new institutional economics+The main profes-

sor there,Rudolph Richter,editor of the Journal of Institutional and Theoreti-

cal Economics, was organizing a conference every year,so I was invited each

time, basically as a guardian of purity so to speak+I was there to judge the

value of the new institutional approach and second to see if there were any

empirical implications of any of these papers that were being presented+I was

supposed to comment or suggest ways to deal with the empirical side+At first

the ratio of words to substance was really high,but the papers became better

and better and more and more rigorous in time+

The reason why I got interested in it is that institutional economics deals

with markets,with the factors that determine the rules of the market game+ I

think we take it for granted in economics that you have well-defined supply

and demand schedules and supplies will come and demand will come and

exchange will take place+We know this happens in auction markets+In other

situations there is not much about it that is known, and new institutionalists are

very concerned about it+One of the major innovators in this area is Oliver Wil-

liamson, and he will probably get a Nobel Prize for his work+Coase is the

original one who introduced some of the implications of transactions costs and

property rights and things like that+Williamson pushed this a little further into

corporate governance+

Rudolph Richter has written a long essay about the development of institu-

tional economics,and there are several kinds of institutional economics that

put an emphasis on different market aspects+I sincerely believe that it is impor-

tant because I have seen in the Czech Republic how important the institutions

were+ Other things that institutional economics pays attention to are the implied

social contract+There are certain assumptions commonly made that people are

essentially honest and that they will not run away without paying+This was not

happening in transition economies+So that definitely was close to my heart and

close to my interests+It does not have much to do with econometrics because

the empirical content of institutional economics is very weak;there is very lit-

tle of it+It was brought to my attention through observing the situation in the

Czech Republic+

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It has helped me to learn more about economies+It was a neglected aspect of

economics that I never had,either as an undergraduate or a graduate student,

learned or even become acquainted with+By now,there are courses in institu-

tional economics that are being taught and even two societies of institutional

economics+ I just think we have been negligent in not paying attention to it+

Receiving the first Karel English Honorary Medal from the Academy of Sciences of the

Czech Republic in 1998 ~with Rudolf Zahradnik,president of the Academy ,and Jan

Svejnar, director of CERGE!+

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Finally, Jan, how would you like to see econometrics develop in the

future?

My main " mission" right now is to persuade the profession of the necessity of

combining economics with econometrics+My favorite philosopher of science,

Karl Popper, claims— convincingly in my opinion—that every theory should

be accompanied with a description of observational circumstances that would

refute it+This necessarily means combining theories with observations+I would

like to see every economic theory allow for the role of chance,which is part of

real-life situations+ The importance of building stochastic elements into any

theory related to human behavior is the essence of that! The bottom line is that

every economic theorist should at the same time be an econometrician and vice

versa+

NOTE

1+ The interviewer is at the School of Economics,University of New South Wales+

REFERENCES

Cornwall, J+ ~1959! Economic implications of the Klein-Goldberger model+ Review of Economics

and Statistics 41, 154–161+

Klein,L+R+ &A +S + Goldberger ~ 1955! An Econometric Model of the United States, 1929– 1952 +

North-Holland+

Marshall,M+ Medoff ~ 1989! The ranking of economists+ Journal of Economic Education ~ Fall!,

405–415+

Zellner,A+ ~1962! An efficient method for estimating seemingly unrelated regressions and tests for

aggregation bias+ Journal of the American Statistical Association 57, 348–368+

Zellner,A+ ~1963! Seemingly unrelated regressions:Some exact finite sample results+ Journal of

the American Statistical Association 58, 977–992+

Zellner,A+ &D +Huang ~ 1962 !Further properties of efficient estimators for seemingly unrelated

regression equations+ International Economic Review 3, 300–313+

SELECTED PUBLICATIONS OF JAN KMENTA

BOOKS

1971

1+ Elements of Econometrics ~ 1st ed+! + Macmillan+ Also published in Spanish ~ Vicens-Vives,1977!

and in Portuguese ~ Editora Atlas, 1978!+ 2nd ed+, Macmillan,1986+ Also published in softcover

for sale as international edition ~Maxwell Macmillan Publishing, 1990! and in Croatian

~MATE,d+o+o+, 1997!+ A 1997 edition was published by the University of Michigan Press,Ann

Arbor+

1980

2+ Evaluation of Econometric Models, co-edited with James B+ Ramsey+ Academic Press+

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1981

3+ Large Scale Macro-Econometric Models: Theory and Practice, co-edited with James B+Ram-

sey+ North Holland+

PAPERS, NOTES, AND BOOK CHAPTERS

1961

4+ Economic mobility of immigrants in Australia+ Economic Record 37, 456–470+

1963

5+ Interindustry wage differentials in Australia, 1947–54+ Australian Economic Papers 2 ~ June!,

85–106+

6+ With M+E+ Joseph+ A Monte Carlo study of alternative estimates of the Cobb-Douglas produc-

tion function+ Econometrica 31, 363–385+

7+ A Monte Carlo study of alternative estimates of the Cobb-Douglas production function: A rejoin-

der+ Econometrica 31,389–390+

8+ Estimates of the Cobb-Douglas production function: A reappraisal+ Metroeconomica 5 ~ August–

December!, 117–124+

1964

9+ Some properties of alternative estimates of the Cobb-Douglas production function+ Economet-

rica 32, 183–188+

1966

10+ With J +G + Williamson + Determinants of investment behavior : United States railroads , 1872–

1941+ Review of Economics and Statistics 48,172–181+

11+ An econometric model of Australia, 1948–61+ Australian Economic Papers 5~ December!,

131–164+

12+ With A+ Zellner & J +Dreze+Formulation and estimation of production function models+Econ-

ometrica 34, 784–795+~ Reprinted in Arnold Zellner @ed+# , Readings in Economic Statistics

and Econometrics @Little, Brown and Co+, 1968 # + !

1967

13+ On estimation of the CES production function+ International Economic Review 8, 180–189+

14+ The approximation of CES type functions: A reply+ International Economic Review 8, 193 – 194+

15+ Economic theory and the transfer of technology+In D+ Spencer & A+ Woroniak ~ eds+! , The

Transfer of Technology to Developing Countries+ Praeger+

1968

16+ With Roy F +Gilbert+Small sample proper ties of alternative estimators of seemingly unrelated

regressions+ Journal of the American Statistical Association 63,1180–1200+

1970

17+ With Roy F +Gilbert+Estimation of seemingly unrelated regressions with autoregressive distur-

bances+ Journal of the American Statistical Association 65,186–197+

1971

18+ With M+E+Kreinin & J +B + Ramsey + Factor substitution and effective protection reconsidered +

American Economic Review 61, 891–900+

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1972

19+ With P +Dhrymes,E+ P +Howrey ,S+H+Hymans,E+E+Leamer,R+E+Quandt,J +B + Ramsey , H+T +

Shapiro, &V +Zarnowitz+Criteria for evaluation of econometric models+Annals of Economic

and Social Measurement 1, 291–324+

20+ Summary of the Discussion+In K+ Brunner ~ed+! , Problems and Issues in Current Econometric

Practice+ Ohio State University Press+

1973

21+ With W +Oberhofer+Estimation of standard errors of the characteristic roots of dynamic econo-

metric models+ Econometrica 41, 171–177+

22+ With Paul E+ Smith+ Autonomous expenditures versus money supply:An application of dynamic

multipliers+ Review of Economics and Statistics 55,229–307+

1974

23+ Exact finite sample distribution for some econometric estimators: Comments+ In M+D+Intrili-

gator ~ed+! , Frontiers of Quantitative Economics , vol+II+North-Holland+

24+ With W +Oberhofer +A general procedure for obtaining maximum likelihood estimates in gen-

eralized regression models+ Econometrica 42, 579–590+

1975

25+ The use of econometrics in problem solving research+ Economie Applique 28, 731–748+

1976

26+ With J +Benus & H+Shapiro +The dynamics of household budget allocation to food expendi-

tures+ Review of Economics and Statistics 58,129–138+

1978

27+ Some problems of inference from economic survey data+In N+K+ Namboodiri ~ed+! , Survey

Sampling and Measurement+ Academic Press+

1980

28+ With J +B + Ramsey + Problems and issues in evaluating econometric models + In Jan Kmenta &

James B+Ramsey ~ eds+! , Evaluation of Econometric Models+ Academic Press+

1981

29+ With J +B + Ramsey + Model size , quality of forecast accuracy ,and economic theory +In Jan Kmenta

& James B+ Ramsey ~ eds+! , Large Scale Macro-Econometric Models: Theory and Practice+

North-Holland+

30+ With J +B + Ramsey + Summary of the general discussion + In Jan Kmenta & James B + Ramsey

~eds+ !, Large-Scale Macro-Econometric Models: Theory and Practice+ North-Holland+

31+ On the problem of missing measurements in the estimation of economic relationships+In E+G+

Charatsis ~ ed+! , Proceedings of the Econometric Society European Meeting 1979+ North-Holland+

1982

32+ With Karl Lin+Ridge regression under alternative loss criteria+ Review of Economics and Sta-

tistics 64, 488–494+

1983

33+ Some notes on the relevance of finite sample distribution theory+ Econometric Reviews 2 ~1!+

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1986

34+ With Howard E+ Doran+ A lack-of-fit test for econometric applications to cross-section data+

Review of Economics and Statistics 68, 346–350+

1987

35+ Heteroskedasticity+ In J +Eatwell,M+Milgate,&P +Newman ~ eds+! ,The New Palgrave: A Dic-

tionary of Economics+ Stockton Press+

36+ With Pietro Balestra+Missing measurements in a regression problem with no auxiliary rela-

tions+ In Daniel Slottje ~ed+! , Innovations in Quantitative Economics: Essays in Honor of Rob-

ert L. Basmann+ JAI Press+

37+ With Eva Marikova Leeds+On the similarity of macro-econometric models of market and

planned economies:The first models of Czechoslovakia+ Comparative Economic Studies 29

~spring!+

38+ Institutions for stochastic markets: Comment+ Journal of Institutional and Theoretical Econom-

ics 143,104–106+

1988

39+ Macroeconomic models and econometrics: Comments+ In W+ Driehuis,M+M+C+Fase,&H +

den Hartog ~ eds+! , Macroeconomic Modeling+ North-Holland+

1989

40+ Towards a positive economic theory of institutional change: Comment+ Journal of Institutional

and Theoretical Economics 145,113–115+

1990

41+ Modelle und Daten:Neue Richtungen in empirischer Forschung innerhalb der Wirtschaftswis-

senschaften+ In H+ Jung, W+ Kroeber-Riel,&E +Wadle ~ eds+! , Entwicklung in Recht und

Wirtschaft+ Schä ffer Verlag+

1991

42+ With Robert Keener & Neville Weber+Estimation of the covariance matrix of the least squares

regression coefficients when the disturbance covariance matrix is of unknown form+ Econo-

metric Theory 7,22–45+

43+ Latent variables in econometrics+ Statistica Neerlandica 45, 73–84+

1992

44+ With Howard E+ Doran+ Multiple minima in the estimation of models with autoregressive dis-

turbances+ Review of Economics and Statistics 74,354–357+

1994

45+ With Ivan Kompan+Bootstrap applications for software reliability measurement+ Central Euro-

pean Journal for Operations Research and Economics 3 ~1!, 51–57+

1995

46+ Assigning the liability for past pollution:Lessons from the U+S+mining industry— Comment+

Journal of Institutional and Theoretical Economics 151,155–158+

2000

47+ Private ordering in the Czech transformation process— Comment+ Journal of Institutional and

Theoretical Economics 156,140–143+

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... 131, 171, 229). In the mid-1950s, before he came to Wisconsin, Goldberger was teaching econometrics to graduate students at Stanford, and Goldberger himself was trained in the early 1950s at the University of Michigan by Lawrence Klein (Lodewijks 2005;Kiefer 1989). ...

Jeff Biddle

I review changes over time in the meaning that economists in the US attributed to the phrase "statistical inference," as well as changes in how inference was conducted. Prior to WWII, leading statistical economists rejected probability theory as a source of measures and procedures to be used in statistical inference. Trygve Haavelmo and the early Cowles Commission econometricians developed an approach to statistical inference based on probability theory, but the arguments they offered in defense of this approach were not always responsive to the concerns of earlier empirical economists that the data available to economists did not satisfy the assumptions required for such an approach. Despite this, after a period of about twenty-five years, a consensus developed that methods of inference derived from probability theory were an almost essential part of empirical research in economics. I conclude with some speculation on possible reasons for this transformation in thinking about statistical inference.

Ross A Williams

Econometrics was slow to be adopted in Australian universities but by the end of the century the output of Australian econometricians was ranked in the top five in the world. This paper documents the uneven development in research and teaching in the discipline over the period from 1930 to 2000 and examines the factors responsible for progress. The major contributions of Australians to the international literature are discussed.

In 1985 the Duke University Manuscript Department, in conjunction with the Department of Economics, began an Economists' Papers Project aimed at preserving the correspondence, writings, and related papers of a number of distinguished economists. These papers contain a treasure trove of useful information, particularly on the development of post-war economic theory.

Arnold Zellner

In this paper a method of estimating the parameters of a set of regression equations is reported which involves application of Aitken's generalized least-squares [1] to the whole system of equations. Under conditions generally encountered in practice, it is found that the regression coefficient estimators so obtained are at least asymptotically more efficient than those obtained by an equation-by-equation application of least squares. This gain in efficiency can be quite large if "independent" variables in different equations are not highly correlated and if disturbance terms in different equations are highly correlated. Further, tests of the hypothesis that all regression equation coefficient vectors are equal, based on "micro" and "macro" data, are described. If this hypothesis is accepted, there will be no aggregation bias. Finally, the estimation procedure and the "micro-test" for aggregation bias are applied in the analysis of annual investment data, 1935–1954, for two firms.

Arnold Zellner

The finite sample properties of an asymptotically efficient technique (JASA, June, 1962) for estimating coefficients in certain generally encountered sets of regression equations are studied in this paper. In particular, exact first and second moments of the asymptotically efficient coefficient estimator are derived and compared with those of the usual least squares estimator. Further, the exact probability density function of the new estimator is derived and studied as a function of sample size. It is found that the approach to asymptotic normality is fairly rapid and that for a wide range of conditions an appreciable part of the asymptotic gain in efficiency is realized in samples of finite size.

Arnold Zellner

Arnold Zellner

Source: https://www.researchgate.net/publication/23564944_The_ET_interview_Professor_Jan_Kmenta

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