46

“Econometrics involves the application ofmathematical and statistical methods to theformulation, estimation, and testing ofeconomic models. Scientifically the subject isstill in its infancy, but the last quarter centuryhas seen an explosive growth, facilitated bythe ever increasing abundance and power ofmodern computers, and spurred on by thedesire of governments and businesses to gainincreased understanding and control of theeconomic environment in which they function.

“This development did not come easily. It washindered by two factors, one general and onespecific. The general factor, which stillpersists, is the wide ranging nature of theintellectual demands on the econometrician inthat he must have competence in economictheory, mathematics, and statistics andcomputing. He must also have a keenappreciation of the defects and limitations ofhis data and an understanding, of theinstitutional realities of the economic or socialsystem that is the focus of his analysis. Thespecific factor was that classical statisticalmethods were basically geared to theexperimental sciences and thus inappropriatein several crucial respects for observationalrather than experimental situations. The firstfundamental steps in the required theoreticaldevelopment were mostly made at the CowlesCommission in Chicago in the years after

An exposition of the methods used byAn exposition of the methods used byAn exposition of the methods used byAn exposition of the methods used byAn exposition of the methods used byeconomists in the statistical estimation andeconomists in the statistical estimation andeconomists in the statistical estimation andeconomists in the statistical estimation andeconomists in the statistical estimation andtesting of economic models is described.testing of economic models is described.testing of economic models is described.testing of economic models is described.testing of economic models is described.Major topics are linear regression model,Major topics are linear regression model,Major topics are linear regression model,Major topics are linear regression model,Major topics are linear regression model,including the complications due toincluding the complications due toincluding the complications due toincluding the complications due toincluding the complications due toautocorrelation, heteroscedasticity,autocorrelation, heteroscedasticity,autocorrelation, heteroscedasticity,autocorrelation, heteroscedasticity,autocorrelation, heteroscedasticity,multicollineari-ty, and lagged variables; andmulticollineari-ty, and lagged variables; andmulticollineari-ty, and lagged variables; andmulticollineari-ty, and lagged variables; andmulticollineari-ty, and lagged variables; andidentification and estimation of simultaneousidentification and estimation of simultaneousidentification and estimation of simultaneousidentification and estimation of simultaneousidentification and estimation of simultaneousequation models. [The equation models. [The equation models. [The equation models. [The equation models. [The Science CitationScience CitationScience CitationScience CitationScience CitationIndexIndexIndexIndexIndex® ® ® ® ® (((((SCISCISCISCISCI® ® ® ® ® ) and the ) and the ) and the ) and the ) and the Social SciencesSocial SciencesSocial SciencesSocial SciencesSocial SciencesCitation IndexCitation IndexCitation IndexCitation IndexCitation Index™ (™ (™ (™ (™ (SSCISSCISSCISSCISSCI™) indicate that this™) indicate that this™) indicate that this™) indicate that this™) indicate that thispaper has been cited over 435 times sincepaper has been cited over 435 times sincepaper has been cited over 435 times sincepaper has been cited over 435 times sincepaper has been cited over 435 times since1963.]1963.]1963.]1963.]1963.]

Jack JohnstonSchool of Social Sciences

University of CaliforniaIrvine, CA 92717

September 8, 1978

NUMBER 16APRIL 16, 1979This Week’s Citation Classic

Johnston J. Econometric Methods,New York: McGraw Hill, 1971 (1963) 437 p.

World War II. By the mid-fifties the stage wasset’ for the first real flowering of the subject.The only difficulty was that only a handful ofprofessional economists at that time had anyreal grasp of the subject.

“In 1957/58, as an assistant professor atHarvard University, I was teaching a course inquantitative methods for graduate economists.The following year I moved to the University ofWisconsin at Madison with one of America’smost distinguished econometricians (Guy H.Orcutt, now of Yale). I had presumed that hewould teach the graduate course ineconometrics there, but to my horror I foundmyself charged with that responsibility. Horroris not an overstatement, for I had no strongprofessional base in econometrics. I had nevertaken a formal course in mathematicalstatistics, even as an undergraduate, norindeed had I ever had the chance to take agraduate level course in any subject. To crownit all, the five graduate students in the classwere outnumbered by Wisconsin economicsprofessors, including Orcutt himself, rangedlike an intellectual Mafia in the back row. Thisturned out to be a stimulating set ofcircumstances. The notes prepared for thosethree weekly lectures throughout the year werethe basis for the first edition of EconometricMethods.

“The publishing decision was almost equallyunusual. There was no outline, notable ofcontents, no specimen chapters. Over anindifferent sherry in a Madison bar the lateMarty Hogan, then of the McGraw Hill Chicagooffice, asked some questions about thecourse, and on his next visit proffered a draftcontract. The main reason, I am sure, forwhatever success the book may have had isthat my ignorance and lack of formal graduatetraining put me closer to the mind anddifficulties of the average student than wouldhave been the case had I been the fortunateproduct of a high-powered graduate school.The disadvantage, of course, is that theignorance of the author shows through hereand there in both editions, as discerningstudents in many countries have reminded me.I sincerely hope their comments will continueand help make the third edition, on which Iam currently working, better than itspredecessors.“