Under the common law, lawyers are not allowed to ask witnesses “leading questions,” as witnesses can be influenced by the way questions are asked. A leading question is one that suggests a particular answer, for instance, “Were you at the country club on Saturday night?” is a leading question, while, “Where were you on Saturday night?” is not.
Econometricians should be as careful as lawyers when questioning the most unreliable of all witnesses: economic data. Most statistical software will automatically spit out t-tests for whether the coefficients in regression models equal zero. This is equivalent to asking the data, “Data, given these modelling assumptions, can you deny with 95% certainty that this coefficient equals zero?” That’s a leading question, and the econometrician shouldn’t ask it unless he has special reason to suspect that the coefficient is zero. (more…)
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