Putting Econometrics in its Place – a New Direction in Applied Economics
G M Peter Swann, Edward Elgar, 2006, iv + 250 pages, £59.95.

This book presents work in progress on a critique of formalism in the mainstream of economics practice. The author proposes a complementary approach to economic practice that can replace the current orthodoxy with a range of multi-dimensional approaches to collecting informal information.

This will be of interest and practical guidance to those seeking to use questionnaire surveys, case studies and interviews to elucidate economic issues. The book draws on material from a range of historical and parallel sources with some interesting asides. Among the latter, for example, there is a tantalising chapter on the role of metaphor as economic explanation that presents a comparison between the song repertoire of birds and the diversity of breakfast cereals that Thomas Huxley would have been proud of.

The book though proposes that a paradigm shift is required in applied economics and seems on less secure ground here. In downgrading the role of the econometric, it seeks to persuade applied economists to move to a pluralism of approaches in their work, as alternatives or at least complements to the econometric; especially, it promotes the claim of ‘vernacular’ or informal economics. The claim is that informal approach-es have the advantage of directly collecting that wisdom of the ‘homespun’ kind, that can serve to build a fuller understanding of the economic behaviour that is being investigated and that would not be revealed in more formal methods. The book is less appreciative of the advances made in mainstream econometrics practice in the last thirty years within the econometrics literature, the insights of rational expectations, or of Bayesian approaches. There is no direct mention of the breakthrough reflected in the use of co-integration approaches in time series analysis following Granger, or the general role of encompassing approaches to model testing. More worrying the book suggests there is a ‘lock-in’ to econometrics as the dominant technique in orthodox applied economics – reflecting a conspiracy of interest by the current leaders of the discipline and their dominance of the leading economic journals that control peer-reviewed publication and thus the incentives for academic economists. To be non-orthodox in this view is to face lack of promotion, lack of research funds, or indeed exile in ‘other sorts of academic departments’. It would be good to see the evidence on this.

Saxon Brettell
Cambridge Econometrics