The First Stage in HendryÕs Reduction Theory Revisited
The reduction theory of David F. Hendry provides a comprehensive probabilistic framework for the analysis and classification of the reductions associated with empirical econometric models. However, it is unable to provide an analysis on the same underlying probability space of the first reduction - and hence the subsequent reductions - given a commonplace theory of social reality, namely the joint hypotheses that the course of history is indeterministic, that history does not repeat itsself, and that the future depends on the past. As a solution this essay proposes that the elements of the underlying outcome space in HendryÕs theory are interpreted as indeterministic worlds made up of historically inherited particulars.
Theory of recution; DGP, Possible worlds; Measurement error; Probabilistic causality
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