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

Good ideas and bad regressions 772. Require data be made publicly available. Another suggestion is to require authors ofaccepted manuscripts to make their data sets publicly available. Although themeasure will do little to close the gap between theory and model, it will providesome checks on specification searches and proxy variable construction. With easilyaccessible data, others can try different proxies and different specifications in orderto determine the fragility of published regressions results. The data are still bad, butpublishing the data may reduce the tendency to report a fragile result.There is little reason today for not requiring all datasets be submitted to journalsalong with accepted papers. We live in the electronic age where journals have theirown websites and many accept electronic submissions. The cost of supportinga data archive must be low and falling but, at present, only the Journal of Businessand Economics Statistics, the Economic Journal, and the Journal of Applied Econometricscurrently support data archives.3. Encourage work on proxies. Another suggestion for improvements in empiricalresearch in the PC area lies in encouraging increased effort in the production andexamination of proxy variables. Bad data beget bad regressions. To have anychance of producing better results, those in the PC area need to begin with betterdata to close the gap between model and theory. Researchers should be encouragedand rewarded for producing good proxy variables. So far, this research hasbeen neglected in public choice and other areas of economics for two reasons:econo mists are not trained to develop proxies and indices and the work of developingproxy variables is not viewed by the profession as “glamorous.”The area of public choice needs more studies of index and proxy variableconstruction. The good news is that several groups are currently involved in theconstruction of indices that might be useful to PC empirical researchers. The badnews is that most of these indices are not being published in economics journals.Perhaps the most popular are the indices constructed to measure economic freedomin a country. Several indices of economic freedom exist: the Fraser Instituteindex of Gwartney et al. (1996), the Freedom House index in the work edited byMessick (1996), and the Heritage Foundation–Wall Street Journal index ofJohnson et al. (1998).Although producing proxies is a worthy goal, the problems with bad regressionswill not disappear with better proxies alone. The PC people, by and large, do notcare about constructing new proxies and, by and large, do not care whether theexisting proxies are any good. Proxies simply represent another empirical opportunity.At present, the proxies that have been produced have been accepteduncritically, gobbled up, and tossed into the same bad regressions. Construction ofthe indices is the beginning of the process, not the end. Indices should be constructed,dissected, and carefully examined (see, for example, Caudill et al. 2000).More and better proxies can help reduce the incidence of bad regressions. Betterproxies will lead to less data mining. Better proxies will, perhaps, lead to thedevelopment of structural models, and better proxies may help get the interest ofthe neighborhood econometrician.