This book is about the specification of linear econometric models, and
for this reason some important related fields have been deliberately
omitted. I did not want to discuss the problems of parameter-estimation,
at least not in any detail, as there are other books on these problems
written by specialized statisticians. This book is about the models
them- selves and macro-economic models in particular. A second related
sub- ject is the policy decision that can be made with the help of a
model. While I did write a chapter on policy decisions, I limited myself
to some extent because of my views on planning as such. The logical
approach to this problem is in terms of mathematical programming, but
our models and our ideas about the policies we want are too crude for
its effective utilisation. A realistic formulation of the problem should
involve non- linearities in an essential way, the models I consider (and
most existing models) are linear. At the present state of econometrics,
I do not really believe in such a thing as the 'optimal' plan. The
possible result of bad planning or no planning at all, for instance
massive unemployment, sudden financial crises, unused capital equipment,
or the production of unsalable goods is agreed to be undesirable.
Programming methods may of course be needed, if only for having a
systematic algorithm to find a solution that avoids this kind of
'obvious' non-optimality. However, the main emphasis is on forecasting
models.
