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Econometrics as Pioneering in Nonexperimental Model Building

Herman O. Wold

Abstract

Econometrics is seen as a vehicle for fundamental innovations in scientific method, above all in the development of operative forecasting procedures in nonexperimental situations. On the one hand there is the evolution relative to experimental situations, for experiments yield reproducible knowledge and new results can therefore be used for forecasting as soon as they are established. Within nonexperimental forecasting, on the other hand, there is the evolution from the largely passive forecasts that are typical in demography over to the operative forecasts in terms of instruments and targets that are the aspiration, difficult to materialize with success, of the multirelational forecasting models of modern econometrics. The econometric developments confirm the general experience that scientific evolution is never a straightforward affair. To solve new types of problems requires a reorientation of the analysis, sometimes a sharp turn from the old tracks, and the sharper the turn the more confused and controversial is the accompanying debate. As briefly reviewed in my Address, econometrics has been pathbreaking in several fundamental developments connected with forecasting, included the transition from exact to stochastic relations, from descriptive to explanatory analysis, and from unirelational to multirelational model building.