The First Stage in Hendry's Reduction Theory Revisited

CORE Discussion Paper No. 2006/82

24 Pages Posted: 5 Dec 2006

See all articles by Genaro Sucarrat

Genaro Sucarrat

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: September 2006

Abstract

The reduction theory of David F. Hendry provides a comprehensive probabilistic framework for the analysis and classification of the reductions associated with empirical econometric models. However, it is unable to provide an analysis on the same underlying probability space of the first reduction -and hence the subsequent reductions- given a commonplace theory of social reality, namely the joint hypotheses that the course of history is indeterministic, that history does not repeat itself, and that the future depends on the past. As a solution this essay proposes that the elements of the underlying outcome space in Hendry's theory are interpreted as indeterministic worlds made up of historically inherited particulars.

Keywords: Theory of reduction, DGP, possible worlds, measurement error, probabilistic causality

JEL Classification: B40, C50

Suggested Citation

Sucarrat, Genaro, The First Stage in Hendry's Reduction Theory Revisited (September 2006). CORE Discussion Paper No. 2006/82, Available at SSRN: https://ssrn.com/abstract=949150 or http://dx.doi.org/10.2139/ssrn.949150

Genaro Sucarrat (Contact Author)

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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