Internalising the externalities of homoeconomicus: Turning silicon astronomers into Popperian bookmakers
Leeson, R. (2001). Internalising the externalities of homoeconomicus: Turning silicon astronomers into Popperian bookmakers. History of Economics Review, 34, 146-159.
In his Presidential Address to the World Congress of the Econometrics Society, Jacques Dreze (1972, 16) promised that looking at real life problems would be ‘a lot of fun’. R. McAfee (1983, 735, 739) responded by making a MADCAP (‘Multiple Augmented Data Construction Assistance Package’) proposal, and discussing the empirical analysis of the ‘effects on scholastic aptitude and economic growth if torture had become an accepted way of teaching undergraduates’. Later, D. McCloskey (1988, 255) reported that ‘the coefficient on DMWITSCI is significant at the 0.05 level, and the coefficient on FAKESCHL at the 0.01 level’.
Presented below is an article in the ‘whimsical’ spirit which Ed Leamer (1983, 43) believes to be appropriate to empirical problems. It addresses the reallife problem of the negative externalities associated with the (privately optimal) output of the ‘economic tricks’ industry, namely, the slings and arrows of outrageous macroeconometric forecasting and policy (Christ 1967, 155). It proposes a diagnostic statistic which will allow these externalities to be reduced, and thus improve the credibility of economists.