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Peter C. B. Phillips, Laws and Limits of Econometrics, The Economic Journal, Volume 113, Issue 486, March 2003, Pages C26–C52, https://doi.org/10.1111/1468-0297.00114
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Abstract
We discuss general weaknesses and limitations of the econometric approach. A template from sociology is used to formulate six laws that characterise mainstream activities of econometrics and their scientific limits. We discuss proximity theorems that quantify by explicit bounds how close we can get to the generating mechanism of the data and the optimal forecasts of next period observations using a finite number of observations. The magnitude of the bound depends on the characteristics of the model and trajectory of the data. We look at one possible future of econometrics using advanced econometric methods interactively with a web browser.