School of Economic Science - Study Forums

[Richard Glover]

"Vector Autoregression" (VAR) may be rather a shock to many members, but is in the news. 2 economists Christopher Sims and Thomas Sargent have just been awarded the Nobel prize for economics for using it on macroeconomics.

VAR is a statistical technique that aims at determining relationships between factors without using any preconception of what they may be. There are several variants of this, and Richard Werner used similar in his analysis of the Japanese economy.

Thus after measuring the mass and trajectories of objects being thrown into the air, it should be possible to deduce the relationship we normally call the law of gravity. Measuring rainfall and the height of a river over time, it should be possible to deduce that rain fills rivers after a certain period.

Although they would seem to have an Achilles heel, it would be a wonderful excersise to use the same and demonstrate that the economic rent of land was a vital consideration when determining how to raise public revenue. The key issue with any such method is to ensure that the appropriate variables are included. If rain was not included, but the phase of the moon or date of the year was, the result may not be so conclusive. If economic rent was not separated from property prices, again the conclusions would be doubtful.

Does anyone reading this have any interest or ability in this area?