Money and Markets: Essays in Honor of Leland B. Yeager

6 Good ideas and bad regressionsThe sad state of empirical work inpublic choiceSteven B. Caudill *It was the late 1990s. As I walked down the hallway my young colleague, JohnWells, a times-series econometrician, was standing in his office doorway mutteringsomething about an “intervention analysis.” I asked, “John, isn’t an interventionwhen your family and close friends get you into a room and confront you aboutestimating bad regressions?”(S.B. Caudill)ForewordWe face an epidemic of bad empirical work in economics and much of it can befound in the public choice area. My goal is to characterize and criticize a cavalierapproach to empirical work that I first noticed in papers in the areas of publicchoice and the sociology of economics. I include the latter because much of thework in the sociology of economics is an extension of public choice and many of thesame researchers are involved. If my characterization of public choice is “goodideas and bad regressions,” then my characterization of the sociology of economicsis either “worse ideas and bad regressions” or “no ideas and bad regressions.”There are no theories in the sociology of economics. Both public choice and thesociology of economics employ a common approach to empirical research that Ihenceforth refer to as the PC approach.Despite the suggestions of my colleagues, I do not plan to “name names” so that,in the words of my marketing colleague, Herbert Rotfeld, “more people will feelguilty.” The lone exception I make is to examine, in detail, the bad regression in thepaper by Laband and Taylor published in Economic Inquiry in 1992 entitled, “TheImpact of Bad Writing in Economics.” I use this paper and identify the authorsbecause the econometrics therein has previously been criticized in print by McCloskey(1992). I merely echo McCloskey’s criticisms to evaluate my characterization of abad regression.In this Foreword I wish to indicate why I, in particular, am bothered by the PCapproach to empirical work. The explanation is found in my background and trainingas an economist, the general nature of PC empirical work, and my experienceteaching econometrics courses to PhD students at Auburn University.