Current Developments in the Interface: Economics, Econometrics, Mathematics: State of the Art Surveys Presented on the Occasion of the 25th Anniversary of the Econometric Institute (Netherlands School of Economics), Erasmus University, Rotterdam, January

352 Pages·1982·22.805 MB·English

by  W. H. Somermeyer (auth.), M. Hazewinkel, A. H. G. Rinnooy Kan (eds.)

Current Developments in the Interface:
Economics, Econometrics, Mathematics
Current Developments
in the Interface:
Economics, Econometrics,
Mathematics
State of the Art Surveys Presented on the Occasion of
the 25th Anniversary of the Econometric Institute
(Netherlands School ofE conomics), Erasmus University, Rotterdam,
January 1982
edited by
M. HAZEWINKEL
Mathematical Centre, Amsterdam, The Netherlands
and
A. H. G. RINNOOY KAN
Department of Operations Research, Erasmus University Rotterdam, The Netherlands
D. REIDEL PUBLISHING COMPANY
Dordrecht, Holland / Boston, U.S.A. / London, England
library of Congress Cataloging in Publication Data
Main entry under title:
Current developments in the interface:
Economics, econometrics, mathematics
Includes bibliographical references and index.
1. Economics-Congresses. 2. Econometrics-Congresses.
3. Economics, Mathematical-Congresses. 4. Erasmus Universiteit
Rotterdam. Econometrisch Instituut-Congresses. I. Hazewinkel,
Michiel. II. Rinnooy Kan, A. H. G., 1949- III. Erasmus
Universiteit Rotterdam. Econometrisch Instituut.
HB21.C87 1982 330 82-16694
ISBN -13: 978-94-009-7935-2 e-ISBN -13: 978-94-009-7933-8
DOl: 10.1007/978-94-009-7933-8
Published by D. Reidel Publishing Company
P.O. Box 17,3300 AA Dordrecht, Holland
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In all other countries, sold and distributed
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D. Reidel Publishing Company is a member of the Kluwer Group
All Rights Reserved
Copyright © 1982 by D. Reidel Publishing Company, Dordrecht, Holland
Softcover reprint of the hardcover 1st edition 1982
No part of the material protected by this copyright notice may be reproduced or utilized
in any form or by any means, electronic or mechanical, including photocopying,
recording or by any informational storage and retrieval system,
without written permission from the copyright owner
TABLE OF CONTENTS
Preface ix
Introduction
Welcoming address to the participants of the symposium
by W.H. Somermeyer
The Econometric Institute: background and developments
by B.S. van der Laan 5
Chapter I. Economics of Academia
Introductory remarks by J. Tinbergen 11
H. Theil, Research in econometrics and the economics
of academia 13
Questions and comments 22
Chapter II. Micro economics
Introductory remarks by T. Kloek 25
J.H. Dreze, Decision criteria for business firms 27
Questions and comments 52
Chapter III. Autocorrelation
Introductory remarks by J. Koerts 55
J. Durbin, More than twenty-five years of testing for
serial correlation in least squares regression 59
Questions and comments 71
Chapter IV. Efficiency and optimization
Introductory remarks by H.N. Weddepohl 73
D. Gale, Efficiency 75
Questions and comments 86
Chapter V. Econometric policy models
Introductory remarks by J. Sandee 87
L. Johansen, Econometric models and economic planning
and policy: some trends and problems 91
Questions and comments 121
vi TABLE OF CONTENTS
Chapter VI. Equilibrium econometrics
Introductory remarks by J. van Daal 123
D.W. Jorgenson, An econometric approach to general
equilibrium analysis 125
Questions and comments 156
Chapter VII. Foundations of identification
Introductory remarks by E.J. Bomhoff 159
R.E. Kalman, Identification from real data 161
Chapter VIII. Planning
Introductory remarks by H.C. Bos 197
L. Kantorovich, Planning, mathematics and economics 201
Questions and comments 210
Chapter IX. Control and economics
Introductory remarks by R. Harkema 213
D. Kendrick, Stochastic control and uncertainty in
dynamic economic systems 217
Questions and comments 232
Chapter X. Disequilibrium econometrics
Introductory remarks by J. Siebrand 235
E. Malinvaud, An econometric model for macro-
disequilibrium analysis 239
Questions and comments 257
Chapter XI. Identification of time series
Introductory remarks by M. Hazewinkel 259
R. Mehra, Identification in control and econometrics 261
Questions and comments 286
Chapter XII. Mathematical programming
Introductory remarks by A.H.G. Rinnooy Kan 289
M.J.D. Powell, Algorithms for constrained and
unconstrained optimization calculations 293
Questions and comments 311
Chapter XIII. Foundations of modeling
Introductory remarks by M.M.G. Fase 313
C.A. Sims, Scientific standards in econometric modeling 317
Questions and comments 338
List of participants 341
Index 347
LIST OF SPONSORS
Erasmus University Rotterdam, Faculty of Economics
Stichting Universiteitsfonds, Rotterdam
Vereniging voor Statistiek (V.V.S.), Rotterdam
Algemene Bank Nederland, Rotterdam
Bllhrman-Tetterode N.V., Amsterdam
Berenschot, Adviseurs voor Beleidsvorming en Organisatie, Utrecht
Digital Equipment B.V., Utrecht
Hermes Information B.V. (Wordprocessors), Gouda
IBM Nederland N.V., Amsterdam
Kuyper, van Dam & Smeer B.V., Rotterdam
Nationale Nederlanden N.V., Den Haag
North Holland Publishing Company, Amsterdam
N.V. Philips' Gloeilampenfabrieken, Eindhoven
Vroom en Dreesman, Rotterdam
PREFACE
This book contains the Proceedings of a symposium that was
held in Rotterdam from 12 to 15 January 1982 to celebrate the
25-th anniversary of the Econometric Institute of the Erasmus
University.
The subject of the symposium, developments in econometrics and
related fields, was particularly appropriate for the occasion. In
25 years the research carried out at the Econometric Institute
developed from the original seminal work in econometrics, carried
out under the supervision of the first director H. Theil, to
embrace related areas such as mathematical economics, operations
research, systems theory and other branches of mathematics,
statistics and probability theory.
To review the state of the art in these areas, thirteen
leading experts were invited to deliver a lecture at the
symposium; their contributions form .the backbone of this book.
Together, they illustrate the wide range and scope of the current
scientific activity in these fields. The thirteen authoritative
surveys should be of great value to researchers and students
alike, who want to become acquainted with recent ideas, current
trends and future developments in their chosen fields of interest.
Each contribution is preceded by an introduction to the author
and his work and followed by a summary of the discussion that
followed the lecture. A special chapter is devoted to the history
of the Econometric Institute.
The symposium was attended by more than hundred participants
from several countries. It required a major organisational effort
by several members of the Institute and would have been impossible
without the active and much appreciated support of the Faculty of
Economics and of the Erasmus University. We are also very grateful
for the financial support received from various benefactors; some
preferred to remain anonymous, the others are listed below.
A shadow over the symposium was cast by the signs of the
serious illness of the director of the Institute, W.H. Somermeyer.
His untimely death, only a few months later, is a great loss to
the Institute and to the scientific community as a whole. This
book, of which he would have been one the editors, is dedicated to
his memory, in recognition of his great personal courage and of
his exemplary scientific integrity.
M. Hazewinkel
A.H.G. Rinnooy Kan
ix
M Hazewinkel and A. H. G. Rinnooy Kan (eds.), Cu"ent Developments in the Interface:
Economics, Econometrics, Mathematics, ix.
Copyright © 1982 by D. Reidel Publishing Company.
PROFESSOR W. H. SOMERMEYER
INTRODUCTION
WELCOMING ADDRESS TO THE PARTICIPANTS OF THE SYMPOSIUM
W• H. SOMERMEYER
On behalf of the Econometric Institute I can only second the
dean of the Economic Faculty, Professor Siddre, in welcoming all
participants to the symposium. Naturally, I am unable to address
them individually, hence I have to do it collectively. Still, I
wish to make a few exceptions to that rule. First, we are honoured
that Professor Tinbergen, pioneer in the fields of mathematical
economics, econometrics and development programming will
participate in our symposium. Particularly we appreciate his
willingness to act as chairman, namely in a session where our
second guest of honour, Professor Theil, first director of our
Econometric Institute, will expound his views on research in
econometrics and the economics of academia.
This brings me, third, to express our special gratitude to all
speakers. We are proud that the great majority of those whom we
invited accepted to deliver lectures on topics within the fields
of econometrics and related domains in which they are interested
and specialized. The remaining few regretted that they could not
come for quite respectable reasons. Finally, I wish to thank all
colleagues willing to act as chairmen of sessions, and
particularly those having to leave their home-towns for this
purpose.
1. WHY A SYMPOSIUM?
I suppose you all noticed the cause, occasion, or perhaps even
excuse for organizing a symposium, namely the 25th anniversary of
our institute. After all, we are all number fetichists. Besides, a
special reason why people are still celebrating silver weddings
and the like, is that in these days of ever-rising rates of
divorce, such marks of duration become increasingly rare, hence
precious.
M. Hazewinkel and A. H. G. Rinnooy Kan (eds.), Current Developments in the Interface:
Economics, Econometrics, Mathematics, 1-3.
Copyright © 1982 by D. Reidel Publishing Company.
2 W. H. SOMERMEYER
When, more than 15 years ago, Professor Theil was succeeded,
as director, by our former colleague and third guest of honour,
Sandee (and me), occasional deprecating remarks were made as
regards the institute's chances of survival. Incidentally this
symposium may affirm that the Econometric Institute is still
alive. In passing, I wish to add that the celebration of the
institute's 25th anniversary was originally proposed by Mr. Van
der Laan, the active secretary of our Program Committee.
Reflecting about such a landmark in time naturally gives rise
to retrospects and prospects. In view of the institute's
cosmopolitan outlook it seemed natural to put its activities in
international perspective. Hence, this symposium, where
econometricians and related scientists from abroad will review and
preview work performed - or still ahead - in fields in which also
Rotterdam's Econometric Institute is active, or at least
interested. For this purpose, the time schedule of the lectures
provides for a dialogue - or rather polylogue - between the
invited speakers and the audience: 10 to 15 minutes introduction
by a Dutch chairman, about three quarters of an hour by the
speaker, leaving approximately half an hour for discussion.
2. NATURE OF THE SYMPOSIUM
The symposium is intended to interest a wide range of
scientists of various but related and cross-fertilizing
disciplines - and possibly to let them partake in the discussions.
For this purpose, the Program Committee asked the invited
speakers to prepare their lectures such that they would appeal to
a rather broad academic audience. Specifically, that they would
present surveys - outlining the "state of the art" in question -
rather than dealing with very special issues. Fortunately, they
all complied with this request, otherwise having been left
sufficient freedom to deal with the topics they cherish in any way
they would like.
That objective, of providing the participants of this
symposium a "tour d'horizon", is also reflected in its title, to
wit "on the development in econometrics and related fields" (both
past and prospective, I would like to add). At first sight, use of
the nruch-abused definite article "the" development etc. might look
presumptious, i.e. as if pretending to cover the entire field of
econometrics etcetera. Of course, this is neither feasible nor -
for that reason - intended. Actually, that sweeping title only
means to convey that we do not wish to impose any bounds on scope
of topics or problems to be dealt with or discussed - except, of
course, as required by relevance and limitations of time (but that
is up to the chairman). And further, that we aimed at variety (or
diversity) rather than unity; this in accordance with the
development of the Econometric Institute itself, towards a
federation of fairly autonomous, "disciplinary" groups
(mathematics, statistics, operations research, mathematical