The Success of Econometrics

Econometric theory has achieved much. Still, there is a feeling in the profession that we are not providing the applied economist with the tools that he needs. In this paper I attempt to highlight the things that have occurred to me as being wrong or strange. The link between the items I discuss is the necessity of a focus. I discuss what an econometrician actually does, the relationship between econometrics and physics and econometrics and mathematical statistics, the gap between theory and practice, top-down and bottom-up methodology, weak links, aggregation and hierarchy, and how to take account of other studies. I conclude with an example from the theory of estimation under model uncertainty.