ABSTRACT
Keynes played a central role in the debate on the emerging econometric methods in the late 1930s. In particular, his 1939 critique of Tinbergen’s first League of Nations study is considered to have sparked off the debate about the role of econometrics (Hendry and Morgan 1995), which saw him involved in direct exchanges with some of the other leading figures of the emerging field of econometrics. After an initial phase in which his objections were constructively discussed, since the early 1940s they were substantially rejected, and his attitude towards economics was considered old-fashioned. The assessment of Keynes’s criticism remains controversial, but the long
prevailing view is that Keynes was an a priori anti-econometrician (see Samuelson 1946; Klein 1951). Stone (1978) maintained that Keynes’s review was ‘a model of testiness and perverseness’ (p. 61) principally due to his temperamental characteristics. Since the end of the 1970s new contributions have recognised the relevance of Keynes’s criticism. However, they concentrated on those remarks of his which dealt with ‘technical issues’ involved with applying regression (e.g. omitted variable bias, simultaneous equation bias, and so on). It was Patinkin (1976) who first found it ‘somewhat depressing to see how many of [Keynes’s criticisms of the use of correlation analysis to estimate equations] are, in practice, still of relevance today’ (p. 1095). Hendry (1980) wrote that ‘[Keynes’s] objections make an excellent list of what might be called problems of the linear regression model’ (p. 396). Some years later Pesaran and Smith (1985) recognised that Keynes was right on both the technical and the logical arguments; and Rowley (1988) maintained that ‘Keynes’s criticisms have been diluted, forgotten or mis-stated rather than absorbed into the prevalent orthodoxy’ (p. 25). He regretted that ‘we have waited too long for econometric methodology to come of age and address its logical bases’ (p. 30). Actually, it is in this wider context that Keynes has been considered in the 1990s. McAleer (1994) writes that ‘some of Keynes’s criticisms of Tinbergen’s pioneering econometric methodology remain relevant to this day’ (p. 332) and that his implicit research programme ‘subsequently led to the development of numerous econometric techniques that are now widely used in applied econometrics’ (p. 334). Similarly Keuzenkamp (2000) maintains that Keynes’s sceptical attitude remains substantially justified.
In conclusion, it is recognised that Keynes’s criticism of Tinbergen was sound in many points. This chapter reconstructs Keynes’s reflections on the issue of the role of
econometrics in the economic discourse in a time perspective longer than is usually considered in the literature. In the second and third sections we analyse respectively the Keynes-Tinbergen debate in the period 1938-40 and the exchange between Keynes and other econometricians in the period 1939-41. The last section provides some final remarks on the relevance of Keynes’s criticism.
