Julian Reiss is Professor of Philosophy at Durham University. He has a degree in economics and finance from the University of St Gallen and a PhD in philosophy from the London School of Economics. His main research interests are methodologies of the sciences, philosophy of economics, and science and values. This spring, Routledge will release the First Edition of his exciting introduction to a newly energized field in philosophy, Philosophy of Economics: A Contemporary Introduction, to be published in the “Routledge Contemporary Introductions to Philosophy” series.

Philosophers since Aristotle have asked questions and offered opinions about economics, broadly defined. But during the 20th century economics developed into a field which was, as Julian points out in the beginning of his forthcoming work, “hostile to philosophical reflection.” Economics became a science: economists began to see in “the economy” a space made up of empirically observable facts interpretable by the assumptions, methods, and models familiar to students enrolled in Econ 101 classes. In recent years, though, certain economic realities—the financial crisis, e.g.—have challenged those assumptions, methods, and models. A writer for the Economist described the consequence of recent challenges to the science of economics: “OF ALL the economic bubbles that have been pricked [since 2008], few have burst more spectacularly than the reputation of economics itself.”

Julian’s book introduces readers to the field in which many of those challenges are now being articulated. Questions of ethics, of the nature of human rationality when faced with economic decision-making, of the verifiability of economic models—these questions and more are all now being asked anew about economic practices and decisions. This interview hopes to open those questions to all curious readers. Those seeking more comprehensive—but still widely accessible explanations—can of course turn to Philosophy of Economics: A Contemporary Introduction.

– John Downes-Angus, Editorial Assistant, Routledge Philosophy

1. Could you give a brief description of the field of philosophy of economics so that it makes sense to non-philosophers, and identify some of the core issues the field takes on?

The philosophy of economics concerns all the questions every economist ought to think about but normally doesn’t because they are regarded as unimportant or unfashionable by the profession. They are about the – moral, methodological, metaphysical – foundations of economic science. Here is an example. Economics is, as is well known, based on a theory of rational choice. This theory assumes that people have stable and transitive preferences over all available alternatives. An economist qua scientist will take the theory as given and explore its consequences. An economist qua philosopher – a philosopher of economics – will challenge its fundamental assumptions. Does rationality really require the existence of stable, transitive and complete preferences? Do people as a matter of fact have such preferences, and how can we know? If not, might the assumption nevertheless be innocuous and useful for explaining economic behaviour and predicting future events?

In the book I divide the philosophical issues raised by economic science into three broad kinds. The first is concerned with the foundations of economic theory. Issues here concern the nature of rationality, whether people do and ought to act rationally as portrayed by the theory, whether there are any economic laws, what’s the nature of causal relations, of mechanisms and so on. The second is concerned with methodology. Methodologists, unsurprisingly, study the methods employed by scientists in order to address their questions. They ask how these methods work, about their presuppositions and the range of questions they can address. Important methods economists use are the measurement of economic indicators (such as inflation, unemployment and GDP), regression methods, economic experiments and randomised field experiments. The third is concerned with the ethical aspects of economics. Whether economic science can and should address ethical issues is particularly contentious among economists. Philosophers are less reserved and ask, for instance, about the nature of well-being, whether or not a given distribution of economic resources is just, whether there are any moral limits to the market and whether or not the government should make decisions for its citizens if doing so improves their well-being.

2. How did philosophy of economics develop? Are there any key figures or contributions that all readers should be aware of?

There are two ways to answer this question because the philosophy of economics is at the same time an ancient and a very recent discipline. It is ancient in that the world’s greatest economists beginning with Aristotle were also or mainly philosophers, and many of their contributions should be classified as contributions to the philosophy of economics rather than the science of economics. Understood in this broad way, Aristotle, Adam Smith, David Hume, John Stuart Mill, Karl Marx, William Stanley Jevons, John Maynard Keynes, Amartya Sen and many others are all among the key philosophers of economics.

On the other hand, with the increasing specialisation and professionalisation of academic disciplines that occurred in the nineteenth century, economics was separated from philosophy and developed, especially after the Second World War, a mainstream paradigm that was hostile to philosophical reflection. At the same time, philosophers of science were mainly interested in natural science and thus tended to ignore economics and other social sciences. It is only in the last 30 or so years that we can once more experience a mutual interest and exchange, and witness the development of academic institutions that focus on the intersection of economics and philosophy. In that sense, then, the discipline is a novel one. There are now a number of professional philosophers of economics in this narrower sense. I was personally greatly influenced by the work of Nancy Cartwright, Mary Morgan and Daniel Hausman, but there are of course others.

3. Has the recent economic crisis harkened in an important, perhaps transformative, moment for philosophy of economics?

It has indeed. Not so much in challenging fundamental beliefs philosophers of economics hold but in bringing methodological issues to the attention of economists and thereby opening entirely new ways of doing philosophy of economics. We now hear Paul Krugman publicly complain that many economists ‘mistake beauty for truth’, Joseph Stiglitz accuse his colleagues of ‘murdering the American economy’ by using bad idealisations in their models and Daron Acemoglu proclaim that ‘The financial crisis is an embarrassment for economic theory’. Many of the issues they are raising, for instance about the unrealisticness of assumptions in economic models, have been discussed by philosophers of economics for many years. But they have tended to do so for the most part in isolation from economic practice (which has no doubt been partly due to the resistance of economists to engage in philosophical debate). With some luck future work in philosophy of economics will be done in closer collaboration with economists, motivated by practical concerns, and relevant to economists’ day-to-day work.

4. Do you think that the changes you mention in (3) will have a lasting impact on the direction of philosophy of economics?

Yes – if the criticisms of Krugman, Stiglitz, Acemoglu and others are taken seriously by economists, and philosophers of economics stop asking abstract-philosophical questions and turn towards economic practice.

5. In what ways does philosophy of economics puncture holes in common economic assumptions?

One has to distinguish between valid criticism of economic assumptions and their uptake by economists. The arguments philosophers of economics have given to the effect that economists cannot ignore engagement with ethics, that the revealed-preference theory is untenable, that new causal relations cannot be established without making strong causal background assumptions and many others are compelling. And yet, they continue to be ignored by many, if not most, professional economists. Philosophers find this situation lamentable, and understandably so. To some extent we have to blame ourselves. Not only do philosophers tend to address issues at too high a level of abstraction, they also often use specialist jargon that is difficult to understand outside the profession. We have to learn to communicate better, to focus on issues that are practically relevant, and, if possible, to work on these issues jointly with economists. Unless that happens, there might be numerous philosophical holes in theory, but they might not affect the way economics is practiced.

6. What can philosophy learn from economics?

A number of things. Let me focus on two areas here, one where economics has already had a great influence on the way philosophy is practised, and another where there is still room for improvement. The use of models, especially mathematical models, has proven extremely fruitful in economics. Models create parallel worlds within which claims can be established rigorously. Having to build a model and to derive claims within its confines demands of the modeller to be exact in certain ways, to make implicit background assumptions explicit, to use the same concepts from the beginning to the end of a derivation and so on. While certainly not unexceptionable, these are virtues in many contexts. Formal tools such as mathematical modelling, the proof of representation theorems etc. have become more popular in recent philosophy, and economics has often been an especially important source of inspiration. John Broome’s books can be regarded as paradigmatic of this kind of work. I do not think that this is the only good way to do philosophy, but it unquestionably has a lot to speak for it.

The other area concerns aims. Economics is, no doubt, in part a policy science. That is, economists confidently use their tools to make policy recommendations on a broad range of subjects. And, for better or worse, their voices are heard. Philosophers of science generally, and philosophers of economics are no exception, tend to take a more Aristotelian, contemplative stance towards science and society. But they shouldn’t. Philosophical issues of economics are of great practical importance. This is most salient in the area of ethical aspects of economics but true throughout. Methodological issues are often interwoven with ethical ones. As philosophers of economics we shouldn’t leave the political field to economists (and philosophers specialising in other areas such as ethicists) but ourselves take a stance and think harder about the applied areas of economics.

7. Does economics require prior formal education in philosophy? If so, how does this affect the discipline’s position in the academy? Along these lines, perhaps, does the philosopher of economics have a double-pedagogical role: to explain adequately the philosophical issue and explain the economic issue under discussion?

I don’t think economics necessarily requires prior education in philosophy, but some philosophy (along with other humanities such as history) should be part of the economics curriculum. There’s a deplorable tendency of economics departments to shut down courses in the history and methodology of economics, and with them departmental research groups. This would be a bad idea even if economics was a body of incontrovertible truths. But it isn’t. Foundational assumptions in economics can and ought to be challenged constantly. As social practices evolve, as societal goals and values change, and they constantly do, traditional assumptions become outdated and need to be revised. Philosophy and history are necessary to understand these developments, and they can help economists to become more reflective and better grounded scientists.

8. Does philosophy of economics address problems that would warrant interest from students and scholars outside of philosophy?

At least some of the problems philosophy of economics are of very broad interest. Think of the moral limits of the market. Should there be markets in kidneys or blood? Do tuition fees affect the way university education is conceived by students? Is paying money to skip the queue morally problematic? These are issues that affect almost anyone. Or consider paternalism. Should the government intervene so people eat more healthily? Is eating healthily really good for us? What if it is good for some but not for others? (As an aside, the book talks about foie gras in various places.) Philosophy of economics isn’t a purely academic discipline.

9. How do economists and philosophers view the field of economics differently? Has there been much recent dialogue between philosophers and economists? If so, what was the goal or the result?

When I teach philosophy to economics students I often notice an unease they have with the way philosophers regard almost any ‘truth’ as tentative, subject to future revision, local, and relative to a context at hand. I’d go on and on, say, about how great a philosopher David Hume was and how important his insights about causation, only to show, at the end of the lecture, how he got it (almost) all wrong. They find that frustrating. This way of thinking should not, however, be altogether unfamiliar to economics students because models, which as I noted above are all over the place in economics, are tentative, erroneous, local, purpose-driven constructs. This is not, however, how models seem to be taught in economics departments.

This, then, is one important difference, and there are many more. These differences often make communication across the disciplines and therefore dialogue difficult. I was recently made fun of at an economics conference for using the word ‘ontology’ and for making a point about causality by quoting Mill. The economist in question said that he didn’t understand ‘ontology’ and Mill was better on liberty than on causality. This was perhaps an extreme case, but it shows that economists and philosophers of economics have some way to go to establish fruitful dialogue.

On the other hand, there are many reasons to be optimistic. More and more philosophers of economics have dual backgrounds these days, PhD theses are jointly supervised and we see some collaboration on research projects. It is just a matter of time that economics and philosophy of economics draw more closely together.

10. How does philosophy of economics affect assumptions and research in other fields like moral philosophy and moral psychology?

I wouldn’t say that philosophy of economics affects these other fields but rather that parts of moral philosophy and moral psychology constitute branches of philosophy of economics or at least that the boundaries between the fields are very fluid. Take well-being as an example. Well-being is clearly a core concern of moral philosophy. But it is also important to welfare economics. So shall we say research on well-being is moral philosophy when done by a moral philosopher (such as James Griffin or Roger Crisp), economics when done by an economist (such as Partha Dasgupta or Angus Deaton) and philosophy of economics when done by a philosopher of economics (such as Dan Hausman or Michael McPherson)? That doesn’t make sense. A researcher interested in well-being will build on results in all three fields, and his or her work will be relevant to all three.

11. You write in the Introduction to Philosophy of Economics: A Contemporary Introduction that “Philosophers of economics are philosophers whose work focuses on the theoretical, methodological and ethical foundations of economics.” Does philosophy of economics itself operate according to a standardized theoretical/methodological/ethical foundation or does that depend on the particular philosopher? Are there philosophical approaches to economics-related issues (i.e., John Searle’s work on social ontology) which are not considered philosophy of economics proper because they do not adhere to such a standardized foundation, if it does in fact exist?

Philosophy of economics in the narrow sense is a young discipline, so little if anything is standardised. Philosophers of science often distinguish the epistemic and metaphysical aspects of science, i.e., the ‘How can we know?’ and the ‘What is there?’. This division leaves out ethics, which is important to all science and to economic science in particular. Moreover, economics is based on a theory of rational action, so one has to include rationality as well. In the book I aim to be comprehensive but nevertheless to provide an overall structure and narrative. The division theory-methodology-ethics is the result. What I call foundations of economic theory includes issues concerning rational action but also traditional metaphysical issues such as laws and causality. Social ontology à la Searle could have been included here, but it is largely irrelevant to practising economists, so I left it out. What I call the methodological foundations includes the traditional epistemic issues of philosophy of science but I address them at the more concrete level of particular methods economists actually use. The same goes for the ethical foundations. Many of them have their counterparts in traditional moral philosophy, but in the book they are addressed in the concrete context of welfare economics.

12. How are the more “pop cultural” philosophy of economics texts—the work of Malcolm Gladwell, for example—received by philosophers of economics?

There is clearly an interest in this kind of literature among philosophers of economics. I remember very early in my career I attended a conference, organised by philosopher-economist Kevin Hoover, where Sylvia Nasar, author of A Beautiful Mind (a popular book about the life of John Nash) gave a keynote. My former colleague at the Erasmus Institute of Philosophy of Economics, Jack Vromen, organised a great conference on the ‘economics made fun’ genre (work such as Freakonomics, The Armchair Economist or More Sex is Safer Sex) a few years back. My own book ends with a chapter on Nudge. Nudge is, of course, also a serious policy proposal, but the book is certainly very popular and some of its ideas (or expressions – think of the image of a parent elephant ‘nudging’ its baby elephant) have become part of pop culture.

13. What do you consider to be the future of philosophy of economics? What are the most pressing questions facing the discipline today?

If we continue to do good philosophical work but in a manner that is relevant to economics, is taken up by economists because it helps to address their concerns, and that can contribute to sound economic policy making, we’ll face a bright future.

14. In your opinion, what philosopher of economics has had the greatest impact on the discipline in the last 100 years?

Without a doubt Amartya Sen.

15. And finally, a more lighthearted question: given their concern with the behavior of individuals in certain economic situations, do philosophers of economics gamble? Why or why not?

There must be some ways to exploit humans’ decision-making follies, but philosophers tend to be too well behaved to actually do it, or even consider doing it for that matter. Seems like a good idea to me though, so off I go.
  

Watch this space for more information. In the meantime, why not take a look at 'The University and the City'.

Darwin’s theory of natural selection presents human beings as self-interested and aggressive. Humans have survived in the ‘struggle for existence’ because they have had the aggressive instincts necessary to see off competition. The theme has been taken up by many social scientists. Many economists see it as an important corroboration of the concept of markets based on competitive individualism. The ‘survival of the fittest’ has been seen as applicable both to the process of natural selection and competition in markets.

Darwin, however, was never entirely happy with his explanation of natural selection in terms of individualistic aggression, at least as a full account of the process. In The Descent of Man he recognises that humans have ‘social virtues’ and a sense of ‘sympathy’, meaning something like empathy in modern usage. He sees that humans are sociable as well as individualistic, but acknowledges that he is unable to provide an account of the social dynamics of humans that will have comparable status to his theory of biological evolution.

The root of the problem is perhaps that Darwin missed the importance of the human instinct for self-preservation. Human individuals have by nature a strong sense of self-preservation. They will for the most part try to avoid conflict and injury. The very strong emotion of fear alerts humans to threats to their self-preservation. The response of every individual is to seek the support of others. So fear, or insecurity, is the trigger to group formation. The group provides security, both psychologically and in the real sense that groups are essential to effective engagement in violence. To gain the support of others, individuals compromise their own interests and sustain the interests of the group. Some individuals will be more valuable to the group than others, and the differences will be reflected in the compromises each makes for the support he requires. Group formation becomes a matter of ‘support-bargaining’. The individuals whose skills and talents are most valuable to the group will have the greatest influence in determining the interests of the group.

Once assured of group support, humans become more confident. Members reassure each other of their courage and fighting prowess. Each individual has an interest in ensuring that all the others fight valiantly and selflessly for the group interest. Involvement in a cohesive group can bring out the aggressive instinct in humans. Humans appear to be aggressive because they invariably get together in groups. As individuals, the instinct for self-preservation is more prominent.

In the Darwinian context support-bargaining is the process by which groups are formed for violent purposes, either defensive or aggressive. But in a social context it becomes the process by which societies identify and advance group interests. People hold meetings to discuss and agree on an approach to local problems. A dominant individual may persuade the others to support his recommendations. Or a show of hands may be requested to see which approach has the most support. Political parties form through support-bargaining to sustain certain interests. It is a fundamental principle of democracy that majority support entitles a group to advance of its interests. Even in the intellectual sphere, groups assemble through support-bargaining to sustain certain theories regarding the nature of human society and the changes they would like to see. The debates over economic theory can be understood as competitive assembly of support. Support-bargaining can be seen as the essential mechanism by which human societies evolve.

See Patrick Spread, 'Support-Bargaining, Economics and Society: A Social Species', published by Routledge, October 2012. Link: www.routledge.com/9780415641128

Other reference:
Books: A Theory of Support and Money Bargaining (Macmillan 1984)
Getting It Right: Economics and the Security of Support (Book Guild, 2004)
Support-Bargaining: The Mechanics of Democracy Revealed (Book Guild, 2008)
Articles: ‘Blau’s Exchange Theory, Support and the Macrostructure’, The British Journal of Sociology, Vol. 35, No. 2, June 1984.
‘Lindblom, Wildavsky and the Role of Support’, Political Studies, Vol. 33, No. 2, pp. 275-295, June 1985.
‘Situation as Determinant of Selection and Valuation’, Cambridge Journal of Economics, Vol. 35, No. 2, pp. 335-56, March 2011.
‘Science and Support: The Struggle for Mastery in Economics’, Real World Economics Review, Issue No. 59, 12 March 2012, pp. 39-57.
‘The evolution of economic theory: And some implications for financial risk management’, Real World Economics Review, Issue No. 61, 26 September 2012, pp. 125-135.
 

Interested in economics? Interested in the blogosphere? Why not take a look at the top 25 economics blogs by following the link below:

http://www.accountingdegree.com/blog/2012/top-25-popular-economics-blogs/

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Earlier this year, Andreas Hinterhuber and Stephan Liozu wrote 'Is It Time to Rethink Your Pricing Strategy?' in MIT Sloan Management Review. Now, MIT's own contributing editor, Leslie Brokaw, provides a comprehensive and engaging summary of the article, focusing on key excerpts, in 'Setting Prices Based on Customer Value'.

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Click here for more information on Professor Haynes' newly published 'Public Policy beyond the Financial Crisis'
 

Future Themes and Priorities for Government and Public Policy Beyond the Crisis

In his recently published research title, 'Public Policy beyond the Financial Crisis', Philip Haynes concludes on the main features of public policy in the next ten years:

• A reduction in inequality - especially with a reduction in the wealth and income held by the ‘super’ rich.

• The increased importance of small organisations (both in the private and public sectors) that promote more dynamic growth and improving services.

• It will become more important for the governments to support such an economy because many small organisations will not easily have the resources to support the welfare of their workers, for example via pension contributions.

• The government will have to subsidise aspects of this economy, such as reducing tax pressures on employment like National Insurance, and promote training and the entry of young people, and the retention of the sick and older people in the labour market.

• Management systems will be built more on values rather than just financial goals.

• New finance products will become popular. These will be an alternative to the bankrupt large financial institutions. They will offer more stable and ethical investing. Examples are:

o Bonds linked to specific government and private projects that offer a fixed rate of interest over long periods and the guaranteed ability to beat inflation.
o Peer to peer internet lending
o Micro credit organisations, often community and value based


His analysis based on the methodology of complex systems theory avoids making conclusions based on a few economic indicators but instead considers a synthesis of many influences, including dominant social and economic values. Public values are starting to change because society is losing confidence in the domination of market values over other values. He argues that the increasing scandals in large corporations and the resulting corruption of major political and economic life are being shown to have a huge social and economic cost.

The current austerity policies will change. Cuts will slow to prevent austerity contributing to recession. When the economy starts to grow again increased taxation will follow and it will be more directed at preventing short term credit expansion and consumption, so that growth is encouraged in exports and long term investment. An increasing proportion of public expenditure will be met by raising taxes rather than borrowing and selective cuts.

For further information visit http://www.routledge.com/books/details/9780415674393/
 

The Editors of one of our new titles The Future of Helium as a Natural Resource discuss the themes of the book in a BBC Radio 4 interview and they make the case in Nature Comment for an international helium agency.

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The Future of Helium as a Natural Resource

Future of Helium as a Natural Resource editors William J Nuttall, Richard H Clarke and Bartek A Glowacki make the case in Nature Comment for an international helium agency

http://www.nature.com/nature/journal/v485/n7400/full/485573a.html

Co-editor of the book Richard Clarke explores the context of the current helium shortages to Quentin Cooper on "Material World" (BBC Radio 4)

http://www.bbc.co.uk/radio/player/b01j6t0n (Interview approx. 21 minutes in)

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Leadership and Change in Sustainable Regional Development: Sotarauta

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Controversies in Local Economic Development: Perry

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Creative Industries and Innovation in Europe: Lazzeretti

Networking Regionalised Innovative Labour Markets: Hilpert

Re-framing Regional Development: Cooke

Regional Development Agencies The Next Generation? : Bellini, Danson and Halkier

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Did you know? There is a 30% discount available to RSA members on books in the Regions and Cities series, and other subject related Taylor and Francis
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This ten volume backlist collection brings together an assortment of his seminal works. Comprehensive and diverse, the collection encompasses such topics as economic growth, international trade, property ownership and Meade’s work on the principles of political economy.

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Despite the negativity Henry received from colleagues, the books proved to be very successful, which in turn made Henry Neave one of our leading academic authors.

I was particularly pleased to be asked to write this item for the Economics arena page on Routledge’s website, in connection with the new editions of both my Statistics Tables and Elementary Statistics Tables. For, although not an economist, I had some exceptionally strong links with the Economics Department at the University of Nottingham back in the 1970s which is when the original edition of my Statistics Tables was being developed. And those links influenced some of the content of the book, as I’ll describe later.

In fact, the earliest link with Economics goes right back to my first year as an undergraduate in the Mathematics Department at Nottingham. Nottingham’s students generally had two-thirds of their first year prescribed by their type of course, with the remaining third being a relatively free choice from a wide range of options. I chose Statistics which, so long ago, was still a relatively new subject on the curriculum. That substantial course (some 60–70 lectures) was taught by Dr (later Professor Sir) Clive W J Granger (1934–2009), a name which will be known to many economists. In particular, jointly with Robert F Engle III, Clive was awarded the Nobel Prize in Economics in 2003 for developing “methods of analysing economic time series with time-varying volatility or common trends”. Clive also pioneered the concepts of cointegration and “Granger-causality”, which I believe are now considered fundamentals of econometrics. He was knighted in 2005.

It will thus be of no surprise that, three years later when I was encouraged to stay on at Nottingham to study for a PhD, I chose Statistics and asked Clive to be my supervisor. It will also be no surprise that my area of study turned out to be the spectral analysis of time series. And subsequently I could hardly avoid becoming familiar with the Box–Jenkins time-series models, seeing that (a) the external examiner for my PhD was Prof Gwilym M Jenkins and, immediately after obtaining the PhD, I spent a year as Visiting Assistant Professor in the Department of Statistics at the University of Wisconsin, whose Chairman was Prof George E P Box! On my return to Nottingham I became Lecturer in Statistics in the Mathematics Department—and Clive immediately handed over the whole 60–70 lectures of that first-year Statistics course to me, and I continued teaching it for many years.
And so my book of Statistics Tables was born …

The course was available to students from a wide variety of disciplines, the prerequisite being a pass in Mathematics in the national pre-university examinations. Most of the attendees were reading Mathematics, Economics or Psychology, but there would usually also be several from further afield, such as Biology, Geography, Philosophy, History, Music, French, etc. Naturally the course needed to contain the traditional stuff of a shorter introduction but, in view of the extra time available and the breadth of specialities in my audience, it was appropriate to include much more, particularly of a practical rather than merely mathematical nature. Amongst the additional topics I chose were nonparametric / distribution-free methods (for even then I was already uneasy about having to “assume normality” so much of the time), some quality control tools and techniques, and various areas of operational research such as queueing theory and simulation studies (so-called “Monte Carlo” methods).

Of course, almost all of both the standard and non-standard topics required the use of tables but, hardly surprisingly, I was unable to discover any published set of tables suitable for the course. So there really was no alternative but to develop such a set myself! That set of tables, along with a small number of additions and a ten-page introduction to their use, became the original edition of Statistics Tables, published by George Allen & Unwin in 1978 and later taken over by Routledge. (The complete title is Statistics Tables for Mathematicians, Engineers, Economists, and the Behavioural and Management Sciences.)

During part of the time that this book was being developed, the Mathematics Department became rather overcrowded and I happily accepted an invitation to move to a vacant office in the Economics Department. I confess that I found the company there to be rather more congenial than some of my colleagues in the Maths Department! While finalising the content of Statistics Tables, my Economics friends recommended I include a couple of tables which they would find extremely useful, tables of the von Neumann ratio and the Durbin–Watson statistics. They are still there in the new edition.

Following some extensive market research, Allen & Unwin subsequently also invited me to produce a second book of tables which would be more suitable for shorter courses and for users lacking the mathematical background of my own students. Elementary Statistics Tables was published in 1981. It covered fewer topics, but several of those that remained were tabulated more fully than in Statistics Tables, and there was considerably more user-friendly explanatory text and simple worked examples throughout. A particular improvement was that, wherever possible, such helpful material was placed on the same pages as the relevant table or, if not, very close by—compared with the single slab of explanation at the start of Statistics Tables.

Looking back, it is amusing that some of my colleagues in the Mathematics Department told me they thought I was wasting my time in publishing these books because before long all such information would be easily available on computers and calculators. Why amusing? Because, over a quarter of a century later, a letter arrived out of the blue from Rob Langham, the Senior Publisher for Economics and Finance at Routledge, saying that, adding up the sales over those 25+ years, I was now one of their “leading academic authors”, and would I consider producing new editions?

But what could I put into new editions (other than some general improvement and tidying up of what was already there)? Before long, I knew what I wanted to do, but imagined it would not be possible. To show you why, let me fill in something of the quarter-century gap between the first editions of the books and Rob’s invitation to produce new editions.

During the 1980s I was privileged to start working with Dr W Edwards Deming (1900–1993). Dr Deming (see left of photo above) is often described as the American statistician who, in the early 1950s, taught the Japanese about both quality and management. His work in Japan is still commemorated through awards of that country’s Deming Prize to both individuals and organisations worldwide for major contributions to, and success with, improved quality. Dr Deming remained substantially unrecognised in the West until the late 1970s. In 1980 I was fortunate enough to be appointed Statistical Quality Advisor to British subsidiaries of the first American company to become seriously interested in his work. Then, beginning in 1985, I served as Dr Deming’s primary assistant on all of his visits to this country to present his celebrated four-day management seminars and to lead study and research sessions, etc. My life was destined never to be the same again!

Earlier, you may have been a little surprised, in view of my background, to note that I didn’t say anything about including time-series analysis in that first-year course at Nottingham. The reason was this. Although obviously respectful of the work produced by Profs Granger, Jenkins and Box, I felt those approaches required a higher level of mathematical ability than was true of my students. There were some more elementary approaches to time-series analysis around (e.g. using simple additive and multiplicative models) but they seemed too crude to be of much practical use. So I didn’t know of anything suitable to include in the course beyond the standard work on regression techniques which was of course already there.

Dr Deming’s work is to do with management, with quality, with process improvement, etc, and so analysis of time series obviously had to be an important requirement. So what did he use? Answer: none of the above! The only tool he ever mentioned in his four-day seminars etc was something which I, and many others, had only come across previously (if at all) in connection specifically with manufacturing processes: and that was the control chart. But Deming’s work was, and is, primarily aimed at management—and it’s not just manufacturing companies that need good management! Initially to me there were two big mysteries here. All I understood about control charts (as evidenced by the single page on the topic in the original editions of both my books of tables) was that (a) you need to get a small sample of values at each time-point to be charted and (b) the underlying theory depended on the data being normally distributed. As already implied, these requirements seemed pretty reasonable with many manufacturing processes. But, to put it mildly, they appeared rather dubious in the much wider range of applications where managers and others need to analyse time series: most processes have only a single value available at any time-point and (though mathematical statisticians wish and often seem to assume it’s true) not everything in this world is normally distributed!

My two-part dilemma fortunately began to be solved within weeks of my first four-day seminar with Dr Deming in 1985 by meeting up with Dr Donald Wheeler at the first American event I attended which had Dr Deming at the helm. First, Don made me aware that Dr Walter Shewhart, who invented the control chart back in the 1920s, did not require data to be normally distributed. In fact, in some delightful language from his famous book of 1931 (despite its title of Economic Control of Quality of Manufactured Product) he stated:

“the fact that the criterion which we happen to use has a fine ancestry of highbrow statistical theorems does not justify its use. Such justification must come from empirical evidence that it works … the proof of the pudding is in the eating.”

And the second part of the dilemma was solved by Don’s popularising a variant of the manufacturing version of the control chart which only requires a single value at any time-point rather than a sample. And it is a beautifully simple tool. At the time he was referring to it by the rather off-putting name of the “XmR chart”; however some time later he started calling it the “process behaviour chart—more syllables but also more descriptive and friendly!

To put you in the picture about the process behaviour chart, I can do no better than quote an introductory paragraph from the new edition of Elementary Statistics Tables:

 “So what’s new? The majority of the added material focuses on a remark¬able statistical technique which, to all intents and pur¬poses, was unknown at the time of the original  edition. At this time of writing it is still largely unknown, especially in academia—it hasn’t yet reached most of the introductory Statistics books and courses. But, during the second half of my career (mostly spent outside academia, unlike the first half), I found the process behaviour chart unbelievably useful due to its (I believe) unique combination of simplicity and effectiveness. Of course, you won’t find it on examination papers. But if you want to analyse and under¬stand data out there in the “real world”, I believe you’ll find it invaluable. Many delegates, sent by their boss, would arrive at my public and in-house seminars in fear and trepidation: they’d never been able to “do Statistics”—they hated the subject! By the end of the day they could understand the process behaviour chart, and they could use it, and they could communicate with it.”

So why did I say earlier, concerning the new editions, “I knew what I wanted to do, but imagined it would not be possible.” Obviously I wanted to introduce the process behaviour chart to the users of my books. Now these are books of Statistics Tables—but construction and interpretation of the process behaviour chart doesn’t even require the user to refer to any tables!

To overcome the problem, I drafted some material and showed it to Rob Langham. After a little discussion he agreed the technique was so important that it should indeed be included. And subsequently, bless him, he successfully steered through Routledge’s Editorial Board my proposal to include a substantial “teach-yourself” section on process behaviour charts in the new editions of both books.

In the final, say, 15 years before I retired in 2004, in my work with companies and in my public and in-house seminars, I used the process behaviour chart far more than all other statistical techniques put together. Try it. When you retire you might find yourself saying much the same thing!

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Introductory Econometrics: A practical approach

By Hamid R. Seddighi

This text book is intended to make econometrics an enjoyable subject for students to learn , to practice and to apply. To this end, this book‘s approach to introducing key ideas of econometrics is somewhat different from that of conventional texts in this filed. Instead of using heavy and unnecessary mathematics to introduce key concepts, this book relies on logical reasoning, discussion, and on economic models and example to explain key concepts and their applications. This is an innovative approach to introduce this subdivision of economics to an audience who otherwise would have been deterred by its complex nature. The text covers key topics in a non mathematical way using economic analysis, real economic data and worked examples to demonstrate key concepts and their applications. The text is suitable for economics and business undergraduate and post graduates students.
 

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