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

80 Steven B. CaudillClosing thoughtsI end with some observations and speculations about our profession and the futureof empirical research. A look at the McCloskey/Laband–Taylor exchange in 1992is instructive. Laband and Taylor wrote an article about bad writing in economicswhich they were able to publish in the well-respected journal, Economic Inquiry. I say“well-respected,” but, as Leland Yeager has often reminded us, in these cases onedoes not think more of the paper, one thinks less of the journal. Although I amsurprised that Economic Inquiry published the Laband–Taylor paper, I am moresurprised that they published the reply by McCloskey. I do not think a greatercondemnation of a published paper has ever been printed.What was the fallout? Very little. Laband is still writing and publishing similarpapers. Economic Inquiry has published another 10–15 articles in the sociology ofeconomics area. In fact, soon after this paper is published I expect someone willcollect data and prove that papers using only OLS are being cited no less thanpapers using more advanced econometric methods.Notes* Regions Bank Professor, born 30 years to the day after Leland B. Yeager. My ideas onthis subject have been shaped by many long discussions with Leland Yeager, RandyHolcombe, and Roger Garrison. I am grateful to Janice E. Caudill, Roger W. Garrison,Daniel M. Gropper, Valentina Hartarska, Randall G. Holcombe, and Roger Koppl forseveral helpful comments.1 However, Holcombe does tell the tale of a prominent public choice economist whodeveloped a theory which led to a prediction about the direction of an effect. After anexhaustive data-mining adventure, no regression model could be produced containing aresult consistent with the prediction of the theory. This failure led the economist to redothe theory.2 We have probably all, at some time or other, written empirical research containing someof these characteristics. Although doing poor research should never be excused, I amtalking here about the habitual offenders. For some economists the four characteristicsabove define a research methodology. It is all they do.3 The term I use to describe the result is a “feel good” regression which indicates that thebenefits accrue to the author and not to the audience.4 There is at least one instance in empirical research where a model having the appearanceof a “pro forma reduced form” should be estimated. This case is the estimation of amodel of individual choice. In these models the dependent variable is a dummy variablerepresenting a choice – possibly an individual’s vote. If the dependent variable is a vote,an econometric model called a conditional logit model can be estimated (see Maddala1983 or Greene 2003).To estimate a conditional logit model one needs data on the choice an individualmakes and the attributes, in each chooser’s perception, of each of the choices, even those notselected. The conditional logit model has a familiar underlying structure. The regressionfunctions associated with each choice are indirect utility functions. The observed choiceis the one that maximizes an individual’s expected utility. This regression model lookslike what Garrison might call a “pro forma reduced form,” but actually has an underlyingand familiar structure.The estimation of this conditional logit model requires enormous data because onealso needs to know how the chooser feels about the options not chosen. For this reason