A Critical Analysis of Dimensions and Curve Fitting Practice in Economics

Kozo Mayumi (), Mario Giampietro and Jesus Ramos-Martin
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Mario Giampietro: Institut de Ciencia i Tecnologia Ambientals, Universitat Autònoma de Barcelona

No 2010_01, UHE Working papers from Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica

Abstract: When dealing with sustainability we are concerned with the biophysical as well as the monetary aspects of economic and ecological interactions. This multidimensional approach requires that special attention is given to dimensional issues in relation to curve fitting practice in economics. Unfortunately, many empirical and theoretical studies in economics, as well as in ecological economics, apply dimensional numbers in exponential or logarithmic functions. We show that it is an analytical error to put a dimensional unit x into exponential functions ( a x ) and logarithmic functions ( x a log ). Secondly, we investigate the conditions of data sets under which a particular logarithmic specification is superior to the usual regression specification. This analysis shows that logarithmic specification superiority in terms of least square norm is heavily dependent on the available data set. The last section deals with economists’ “curve fitting fetishism”. We propose that a distinction be made between curve fitting over past observations and the development of a theoretical or empirical law capable of maintaining its fitting power for any future observations. Finally we conclude this paper with several epistemological issues in relation to dimensions and curve fitting practice in economics.

Keywords: dimensions; logarithmic function; curve fitting; logarithmic specification (search for similar items in EconPapers)
JEL-codes: C01 C13 C51 C65 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010-02
New Economics Papers: this item is included in nep-ecm and nep-hpe
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