Using research designs patterned after randomized experiments, many recent economic studies examine outcome measures for treatment groups and comparison groups that are not randomly assigned. By using variation in explanatory variables generated by changes in state laws, government draft mechanisms, or other means, these studies obtain variation that is readily examined and is plausibly exogenous. This paper describes the advantages of these studies and suggests how they can be improved. It also provides aids in judging the validity of inferences they draw. Design complications such as multiple treatment and comparison groups and multiple pre- or post-intervention observations are advocated.

Comparing Predictive Accuracy

The equilibrium growth model is modified and used to explain the cyclical variances of a set of economic time series, the covariances between real output and the other series, and the autocovariance of output. The model is fitted to quarterly data for the post-war U.S. economy. Crucial features of the model are the assumption that more than one time period is required for the construction of new productive capital, and the non-time-separable utility function that admits greater intertemporal substitution of leisure. The fit is surprisingly good in light of the model's simplicity and the small number of free parameters. THAT WINE IS NOT MADE in a day has long been recognized by economists (e.g., Bdhm-Bawerk [6]). But, neither are ships nor factories built in a day. A thesis of this essay is that the assumption of multiple-period construction is crucial for explaining aggregate fluctuations. A general equilibrium model is developed and fitted to U.S. quarterly data for the post-war period. The co-movements of the fluctuations for the fitted model are quantitatively consistent with the corresponding co-movements for U.S. data. In addition, the serial correlations of cyclical output for the model match well with those observed. Our approach integrates growth and business cycle theory. Like standard growth theory, a representative infinitely-lived household is assumed. As fluctuations in employment are central to the business cycle, the stand-in consumer values not only consumption but also leisure. One very important modification to the standard growth model is that multiple periods are required to build new capital goods and only finished capital goods are part of the productive capital stock. Each stage of production requires a period and utilizes resources. Halffinished ships and factories are not part of the productive capital stock. Section 2 contains a short critique of the commonly used investment technologies, and presents evidence that single-period production, even with adjustment costs, is inadequate. The preference-technology-information structure of the model is presented in Section 3. A crucial feature of preferences is the non-time-separable utility function that admits greater intertemporal substitution of leisure. The exogenous stochastic components in the model are shocks to technology and imperfect indicators of productivity. The two technology shocks differ in their persistence.

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Time to build and aggregate fluctuations

We propose and evaluate explicit tests of the null hypothesis of no difference in the accuracy of two competing forecasts. In contrast to previously developed tests, a wide variety of accuracy measures can be used (in particular, the loss function need not be quadratic and need not even be symmetric), and forecast errors can be non-Gaussian, nonzero mean, serially correlated, and contemporaneously correlated. Asymptotic and exact finite-sample tests are proposed, evaluated, and illustrated.

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Econometric policy evaluation: A critique

Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.

Estimation and Inference in Econometrics

IN THE Preface of the awaited Keynes biography, R. F. Harrod explains that he was solicited by Mr. Geoffrey Keynes to undertake the serious task of unveiling the many-sided life of John Maynard Keynes. Harrod had access to Keynes's personal files and the sincere co-operation of the family; thus he can be viewed as the official or definitive biographer. There will undoubtedly be further writings on Keynes's life, but Harrod has fashioned a product that will remain as a memory of an illustrious career. The Life of John Maynard Keynes is thorough and revealing. Harrod set aside his special pen for political tracts or breezy economic analysis which we have learned to associate with some of his other writings and drew out a pen for recording careful, painstaking thoughts accompanied by great insight. This volume has already made an impression on readers in England and in this country. It is, in my judgment, especially interesting to Americans. It puts us in touch with unfamiliar aspects of Keynes's life and a range of activities in British intellectual circles for almost the first half of this century. It is, indeed, a story of the times. Moreover, an nth-hand folklore about Keynes's activities has grown up in this country, perhaps because of the relative remoteness of his locale. One of the great virtues of the Life is to clear the record of false items that inevitably get mixed with the truth in the retelling. In this volume we learn, authentically, of Keynes's early associations with classical scholars, his work in the government, the building of his fortune, his journalistic output, his cultural activities, his political activities, and the development of his economic thought. Many pages of the Life are devoted to Keynes's student days at Eton and Cambridge. While there has been some question raised as to the appropriateness of detail on this phase, I find it rewarding as a background for understanding subsequent developments. As an American reader, I find it an interesting description of English student life, although I dare not generalize from Keynes to other students. At the other extreme, Harrod spends many pages on Keynes's work during World War II, Bretton Woods, and the negotiations for the United States loan to Britain. This, too, is interesting material, in that it clears up many details that would otherwise be left obscure for outsiders. We all know, in a rough way, of the "Keynes Plan" for an international clearing union, followed by his participation at Bretton Woods and his activity in negotiating the loan to Britain; but, for the most part, we know little of the magnitude of his actual work along these lines during his last years. Harrod performs a great service in making this information available in detail, although I do feel that he greatly overI A review note of R. F. Harrod, The Life of John Maynard Keynes (New York: Harcourt, Brace & Co., 1951). Pp. xvi+674. $7.50.

The Life of John Maynard Keynes

A textbook of econometrics

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics and Social Science, 1944.

Lawrence R. Klein

Papers

The Life of John Maynard Keynes

A textbook of econometrics

The Keynesian Revolution

A Constant-Utility Index of the Cost of Living

The Keynesian Revolution