July 24, 2018

When the mind plays tricks!

Edward Leamer, famous for his 1983 article in the American Economic Review, “Let´s take the con out of econometrics”, in January 2007, published an essay “Is a Recession Ahead? The Models Say Yes, but the Mind Says No”.  To him, “Housing is the business cycle”, so he syas: Any model built on housing starts is sure to say a recession is coming soon. But, the curmudgeon jokes: “Economists are like artists. They tend to fall in love with their models.” With considerably less pleasure, I would add. Further on, he writes: Thus, when your mind tells you that your model… Read More