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

68 Steven B. Caudillvariable he discussed was the average altitude of the state. The higher the altitude,the more difficult to leave, and difficulty leaving implied more monopoly power, orso we were told. One has visions of people stuck on mountains being taxed to death.An alternative view is that the high altitude would make it easier to leave a state –one could simply coast downhill to lower taxes. My relatives in Eastern Kentuckywould probably agree with this higher altitude–less monopoly power effect, but foran entirely different reason. The terrain in Eastern Kentucky is hilly which, in thepast, has made it difficult and dangerous for “revenuers” to come around.These comments are not meant to suggest that I took this altitude variableseriously. My reactions were surprise and amusement. As I was seated near themiddle of the room, I began looking over my left shoulder, then my right shoulderto see whether the audience or the presenter would snicker and let me in on thejoke. Neither the audience nor the presenter snickered, so I concluded that this wasto be taken as serious economics. I waited and hoped someone would call this jokeoff, but the presenter calmly began discussing the next explanatory variable, “I alsoinclude the diameter of the smallest circle that can be drawn around the state.”This was too much. Is this really empirical research? Sadly, most of the audience satbusily writing the names of two new proxy variables to use in their regressionmodels, just in case their other proxies failed to produce.The empirical research just described is but one example of a “bad regression”which is all too typical of the approach to empirical research found in public choiceand the sociology of economics. Although the empirical research in public choice andthe sociology of economics are similar, these areas differ in how the research papersare constructed. Public choice is a field in economics based on economic theoriesand principles. A typical public choice empirical paper has a theory sectionfollowed by an empirical section. The sociology of economics is the study ofeconomists – how we write, how we work, how we do what we do. Papers in thisarea do not have theory sections, although authors may try to disguise this fact byusing economic language in place of theory. Without theory, empirical work in thesociology of economics is reduced to being descriptive in nature.This paper represents an attempt to characterize the PC approach to empiricalresearch and to show that “bad regressions” are a consequence of this approach.Several solutions to the problem of bad regressions are discussed including: (1)omitting the empirical work from the paper; (2) requiring that data sets used in thepapers be made publicly available; (3) rewarding research work on the constructionof proxy variables and indices; and (4) reminding those in the profession in theirroles as educators and referees to demand improvements in the quality of empiricalwork and to stop publishing papers until the quality is improved.Why empirical research?First, let us establish the uses of empirical research. Econometricians offer thesethoughts on the goals of empirical research:the entire body of economic theory can be regarded as a collection of relations